Registration Data: Function/position: Communications ... · 1 Economic Dimension 1.1 Corporate...

SAM Research Corporate Sustainability Assessment Questionnaire DJSI Sustainability Assessment 2010NESTLE SA/AG

1 of 108, Copyright © SAM Research Inc., 2001 – 2010

SAM Research AGMember of SAM Group

Josefstrasse 218CH-8005 ZurichTel. +41446531010Fax [email protected]

Company Name: NESTLE SA/AG

Registration Data:

Main contact person: Tim_Wolfe(Person to be contacted in the case of questions)

Function/position: Communications Manager

Department: Corporate Communications

Address: Avenue Nestl�e

Town/city: Vevey

Zip: 1800

Country: Switzerland

Phone: +41 21 924 27 56

Fax: +41219242813

E-mail: [email protected]

Web: http://www.nestle.com



DJSI Sustainability Assessment 2010

1 Economic Dimension

1.1 Corporate Governance

1.1.1 Checks & Balances: Board structure

Please indicate in the following table the number of executive and non-executive directors on the board ofdirectors/supervisory board of your company. Please find additional explanation concerning one-tier, two-tiersystem in the information button.❍ ONE-TIER SYSTEM. For companies with board of directors.

Number of membersExecutive directors _ _ _ _ _ _ _ _ _ _Non-executive directors (excl. independent directors) _ _ _ _ _ _ _ _ _ _Independent directors _ _ _ _ _ _ _ _ _ _Total board size _ _ _ _ _ _ _ _ _ _

✓ TWO-TIER SYSTEM. For companies with supervisory board.Number of members

SUPERVISORY BOARD Non-executive directors (excl.independent directors)

12

Independent directors 2Employee representatives (if notapplicable, please leave the fieldempty)

_ _ _ _ _ _ _ _ _ _

MANAGEMENT BOARD/EXECUTIVE MANAGEMENT

Senior executives 13

TOTAL SIZE OF BOTH BOARDS 27

❍ Not applicable. Please provide explanations in the comment box below.

❍ Not known

Comment :Modified tw-tier system, according to Swiss law

1.1.2 Checks&Balances: Non-executive chairman/Lead director

Is the board of directors/supervisory board headed by a non-executive and independent chairman and/or anindependent lead director?



❍ Yes, chairman is non-executive and independent. Please specify how many years ago this approach wasadopted:_ _ _ _ _ _ _ _ _ _

✓ Yes, role of CEO and chairman is split and former CEO/chairman is now chairman.

❍ Yes, role of CEO and chairman is split and former CEO/chairman is now chairman, but independent leaddirector is appointed. Please indicate name:_ _ _ _ _ _ _ _ _ _

❍ No, role of chairman and CEO is joint, but independent lead director is appointed. Please indicate name:_ _ _ _ _ _ _ _ _ _

❍ No, role of chairman and CEO is joint or chairman is an executive director.


❍ Not known.

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.1.3 Checks&Balances: Responsibilities and committees

Please indicate in the table below the functions, and associated committee names, for which the board ofdirectors / supervisory board explicitly assumes formal responsibility.✓ Function Responsibilities Name of committee

Strategy ✓ Formal board responsibility Full Board of Directors

Audit, accounting, riskmanagement

✓ Formal board responsibility

✓ All members are non-executives

Audit Committee

Selection and nomination of boardmembers and top management



Nomination Committee

Remuneration of board membersand top management



Compensation Committee

Corporate social responsibility,corporate citizenship, sustainabledevelopment

✓ Formal board responsibility Chairman's &CorporateGovernance Committee




❍ Not known

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.1.4 Transparency&Accountability: Corporate governance policy

Please indicate if the board of directors/supervisory board has issued a formal corporate governance policy and ifit is publicly available and covers the following aspects:✓ Yes, formal corporate governance statement:

✓ Documented in: Corporate Governance Report 2009 and/or website: http://www.nestle.com/AllAbout/Governance/Governance.htm

✓ Statement of compliance of the formal policy with current legislation

✓ Remuneration framework and performance evaluation of the members of board of directors/supervisoryboard, CEO and senior executives

✓ Independency statement of board of directors/supervisory board

✓ Attendance of board of directors/supervisory board meetings disclosed

✓ Biographies, CVs of board of directors/supervisory board disclosed

✓ Other mandates of board of directors/supervisory board members disclosed

❍ No formal corporate governance policy


❍ Not known

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.1.5 Checks&Balances: Diversity: gender

How many women are members on your company's board of directors/supervisory board?✓ 3




❍ Not known

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.1.6 Checks&Balances: Board effectiveness

How does your company ensure the effectiveness of your board of directors/supervisory board and the alignmentwith the (long-term) interests of shareholders?✓ Indicators/measures

Stock ownership (value at the end of last business /fiscal year)

✓ Non-executive directors are required to buyshares

✓ Non-executive directors' individual average stockownership is worth (in USD):1667761 USD

Number of meetings attended in percentage lastbusiness / fiscal year

✓ All members attended 98% of meetings of board of directors/supervisoryboard.

✓ Minimum of attendance for all members required,at least (in %)98

Number of other mandates of the board of directors /supervisory board members.

✓ Number of directors with 4 or less othermandates: 11

❏ Number of other mandates for all directorsrestricted to: _ _ _ _ _ _ _ _ _ _

Performance assessment of board of directors/supervisory board members.

✓ Regular self-assessment of board performance.Please specify or provide supporting documents:

See Charters of Board Committees and Board ofDirectors Regulations (page 7), available on theNestlé Internet: http://www.nestle.com/AllAbout/Governance/Governance.htm

✓ Regular independent assessment of boardperformance. Please specify or provide supportingdocuments:

Internal documentation only.




❍ Not known

Comment :See attached links for detailed information of Board responsiblities as well as Regulations and Charters.

1.1.7 Entrenchment provisions

Please indicate if your company has adopted any entrenchment provisions at the board of directors / supervisoryboard level:✓ Entrenchment Provision

Staggered (or classified) board ✓ Yes

❍ No

Limits to amend by-laws: supermajority required ❍ Yes

✓ No

Limits to amend charter: supermajority required ✓ Yes

❍ No

Supermajority requirements for mergers ✓ Yes

❍ No

Golden parachutes ❍ Yes

✓ No

Poison pill (i.e. shareholder rights plans) ❍ Yes

✓ No


❍ Not known

Comment :See Nestle Articles of Association requiring three-year terms; no US-style staggered board, but approximately onethird of directors to be elected each year.

1.1.8 Checks&Balances: Audit Conflict of Interest

Please indicate in the table audit, audit related and non-audit related fees (e.g. for management consulting)paid to your company's auditing firm at corporate level in the last fiscal year. Please attach/provide supportingdocuments or indicate website.



✓ Currency unit:CHF

Amount: Comment:

Audit fees 52 ( in mil CHF ), of which KPMG, intheir capacity of group auditorsreceive CHF 50 mio

Audit-related fees 12 ( in mil CHF ), of which KPMGreceived CHF 4 mio.

Non-audit related fees (excludingtax services)

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Tax services❏ Tax services approved by

board.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Other fees paid _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _❍ Not applicable. Please provide explanations in the comment box below.

❍ Not known

Comment :See Annual Report / Corporate Governance Report

1.1.9 Transparency of senior management remuneration

Does your company communicate the remuneration/compensation of your board of directors/supervisory boardmembers and other highest paid senior directors/executives (e.g. CEO ) externally? Please attach supportingdocuments.

✓ Yes, on individual level of each board member and CEO and additional highest paid senior executives.

❍ Yes, on individual level of each board member and CEO.

❍ Yes, on an aggregated level for non-executive directors AND on aggregated level for executives directors.

❍ Yes, on aggregated level of board/supervisory board.

❍ No


❍ Not known

Comment :



Published in the Corporate Governance Report 2009 See Compensation Report, pages 27 - 28 "Say on pay" voteat AGM introduced in 2009

1.1.10 MSA Corporate Governance

In this section we include a performance score on the Corporate Sustainability Monitoring with the objectiveto verify the company's involvement and management of crisis situations that can have a damaging effect onreputation. The evaluation will be filled in by the responsible analyst of your industry. No additional information isrequired from your company. Please disregard the comment box. _ _ _ _ _ _ _ _ _ _Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.2 Risk & Crisis Management

1.2.1 Responsibility Risk & Crisis Management (incl. water and climate)

Please indicate the name, position,reporting line and responsibilities of your chief risk officer or personresponsible for this function at the group level.

✓ Name: Marc Schaedeli Position: Head of Group Risk Management Number of levels from the Board of Directors/executive board: 2 Reporting line: CFO✓ Includes responsibilities for water-related risks

✓ Includes responsibilities for climate change-related risks


❍ Not known

Comment :Group Risk Management has functional responsibility which does include: - A centre of expertise, incl. a networkof trained “facilitators” throughout Nestlé. - A resource efficient methodology using facilitated workshops. - Aset of tools to provide an insight about how to apply the risk management process - Support and training in riskmanagement capability. - A regular update of ERM principles to ensure common terminology, aligned processes,minimal standards. - A regular benchmark and continuous improvement of ERM process. - A central repository



allowing transparency and reporting. - Information on risk management for communication to stakeholders. -Regular risk consolidation at Group level.

1.2.2 Analysis of Risks

Do you use two- or multi-dimensional risk analysis tools (such as risk maps) in order to identify financial andbusiness risk exposures ? – Please provide supporting documents.

❍ ❍ Yes, we use risk maps as a risk analysis tool, only for financial risks

❍ Yes, we use risks maps as a risk analysis tool – for financial and business risks. Please specify whichbusiness risks are included in the risk map._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

✓ ❍ Yes, we use other tools as risk analysis tools, only for financial risks – please describe:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

✓ Yes, we use other tools as risk analysis tools – for financial and business risks - please describe:Other tools used to quantify risks: HACCP, HAZOP, Value Engineering Analysis (VEA), SWOT, Quant,Monte-Carlo, VaR, Vendor Approval, Process, Failure Modes and Effects Analysis (FMEA), Fault Tree,Fault tree analysis (FTA), Root-Cause Analysis, etc.


❍ Not known

Comment :Financial AND Business risks quantified with risk maps (I cannot put this information in the related section): 1.Operational: Competitor, Customer, Consumer, Brand, Generating Demand, HR, IT/IS, Quality/Food Safety,Supply disruption (man-made), D&S Planning, Commodity, Workplace Safety related risks. 2. Finance &Reporting: Counterparty, Internal controls / fraud, Shared Service Center, Treasury/Investment, Liquidity crisis,Currency / interest rate related risks. 3. External: Political / Social / Reputation / Other external (pandemic,environment, etc.), Supply disruption (natural disasters), Procurement (availability, sustainability of supply),Regulatory change related risks. 4. Compliance & Governance: Tax / royalties, Non-food compliance, Legalrelated risks. 5. Strategical: Major Initiative, Business strategies related risks.

1.2.3 Risks Correlation

Do you perform a correlation analysis of the key risks identified ? – Please provide supporting documents.

❍ Yes, we perform a correlation analysis, only for financial risks.

✓ Yes, we perform a correlation analysis – for financial and business risks. Please specify which business risksare included in risk correlation analysis.



Correlation analysis are performed for financial & business risks using models such as S&P ratings, Moody’sratings, OECD leading indicators, Citibank WERM currency valuations, UBS PPP analysis, etc.


❍ Not Known

Comment :Examples of business risks included in correlation analysis are the following: Forex (impacting raw material/commodity procurement), OECD leading indicators, e.g. industrial production, business confidence, consumerconfidence (impacting net proceed of sales), Credit spread (impacting consumer behavior).

1.2.4 Sensitivity Analysis and stress testing (incl. water and climate)

Does your company perform sensitivity analysis and stress testing on a group level? Please attach supportingdocuments or indicate the website.

✓ ✓ yes, on changes of financial risks, such as exchange and interest rates

✓ yes, on changes in carbon pricing

✓ yes, on changes in water availability or water quality

✓ yes, on other risks (e.g. operational risks, market risks, strategic business risks, compliance risks). Pleasespecify:1. Financial risks: Sensitivity analysis/test performed on total portf. & benchmark dev. (monthly review inALMC) using Bloomberg and for Impairment goodwill 2. Carbon pricing: EU Emission Trading Scheme (EUETS) of Kyoto Protocol (23 factories). Internal process to analyse next steps. 3. Water availability / waterquality: Stress testing is part of Nestlé's Water Resources Review (WRR) programme. 4. Operational /Business / Strategic risks: Business planning (MBP) process, to which Dynamic Forecast (DF) is one ofthe ingredients, foresees that businesses revise monthly business scenario, adapt actions to cover gaps& mitigate/fix key risks. MBP best practices widely communicated to markets. MBP implemented on amonthly basis in most markets as per Group priority. 5. Nestlé captive insurance company - All insuredrisks: Stress testing: The Swiss Solvency Test model includes stress testing scenarios. All details for thespecific scenarios can be found attached in the reference document.

❍ No


❍ Not known

Comment :Water availability or water quality: In terms of water availability, ref. to Nestlé Creating Shared Value Report2009 (full version, pag.56) on our Water Resources review (WRR). Water quality is also an aspect analysedas part of the WRR activity. Moreover, quality of water resources used in all our factories is monitored mainlyaccording to Nestlé Quality Management policies and standards. To date, the WRR has been conducted at 65Nestlé Waters sites – more than half of its total bottled water facilities – and is now being rolled out to our foodfactories (total number is 21 factories for 2009/2010 period: 11 factories reveiwed in 2009 and 10 factories in the2010 program). All selected sites are being prioritised by their position in our Water Stress Index, which in turn isbased on external indicators of water poverty, watershed stress and internal local indicators. In fact, the 'NestleWater Management Report' (2007) reported originally that 49 (out of total 481) factories were falling in water



stressed countries, according to the Water Poverty Index developed by the Centre of Ecology and Hydrologyof Wallingford (UK). Nestlé is currently in the process of applying a new method to assess globally all factories(by GPS locations) from a water stress prespective, using a new Index derived by the combination of availableinformation on "freshwater availability per capita" and "water withdrawals to water availability ratio".

1.2.5 Risk Response Strategy

As part of your corporate risk response strategy which risks does your company retain, which are transferred, andwhich risks are avoided? Please provide some examples and attach supporting documents or indicate website.

✓ ✓ Risks retained (risk exposure is accepted without further mitigation):No insurance against Credit, Fidelity, Products Recall, Products Tampering or Employment PracticeLiability and against risks which represent a low financial commitment / high occurence.

✓ Risks reduced/transferred (risk exposure is reduced/transferred to others or consequences are reduced):Mitigation in place against operational (customer, competitor, consumer, etc); finance & reporting (fraud,etc); external (pandemic, regulatory, etc); compliance & governance (tax, legal, etc) risks.

✓ Risks avoided (risk exposure will be eliminated entirely, e.g. through ceasing a business): Not used assuch, but can still happen by selling a business, we will certainly avoid risks in part of our business.

✓ Others, please specify: Risk taking, opportunity management: We also identify and quantify buinessopportunities and develop plans to further enhance those. More awareness leads to more risk taking andcompetitive advantage.


❍ Not known

Comment :Nestle operates a hedge strategy using the derivatives traded on the relevant commodity exchanges. Nestlénormally does not consider to completely avoid risks, rather wants to create sufficient awareness / transparencyin order to help the management to take sound business decisions. Nevertheless, by selling a business, we willcertainly avoid risks in part of our business.

1.2.6 Crisis Preparedness

Do you have any contingency plans for the key environmental risks identified? Please provide examples orsupporting documents (sample document is sufficient, confidential information can be blanked out).

✓ Yes, please describe:Our Nestlé Environmental Management System (NEMS) which applies to all our activities, includes allISO 14001 requirements, especially the following one : 4.4.7 Emergency preparedness and response Theorganization shall establish, implement and maintain a procedure(s) to identify potential emergency situationsand potential accidents that can have an impact(s) on the environment and how it will respond to them. Theorganization shall respond to actual emergency situations and accidents and prevent or mitigate associatedadverse environmental impacts. The organization shall periodically review and, where necessary, revise



its emergency preparedness and response procedures, in particular, after the occurrence of accidents oremergency situations. The organization shall also periodically test such procedures where practicable.

❍ No


❍ Not known.

Comment :At the end of 2009, 424 factories already had an ISO 14401 certificate, out of a total of 449 factories. All ourfactories will be certified against ISO 14001 at the end of the year.

1.2.7 MSA Risk & Crisis Management

In this section we include a performance score on the Corporate Sustainability Monitoring with the objectiveto verify the company's involvement and management of crisis situations that can have a damaging effect onreputation. The evaluation will be filled in by the responsible analyst of your industry. No additional information isrequired from your company. Please disregard the comment box. Existing CSV, Climate Change, Water, SAINS,etc. initiative are aiming to anticipate and prevent as well as reduce the impact of crisis situations that can have adamaging effect on reputation.

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.3 Codes of Conduct/Compliance/Corruption&Bribery

1.3.1 Codes of Conduct: Focus

Please indicate for which areas corporate codes of conduct have been defined at a group level (includingsubsidiaries). Please attach references

✓ ✓ Corruption and bribery

✓ Discrimination

✓ Confidentiality of information

✓ Money-laundering and/or insider trading/dealing

✓ Security of staff, business partners, customers

✓ Environment, health and safety

✓ Whistleblowing



❍ No group-wide code of conduct

❍ Group-wide code of conduct to be implemented within the next (months)_ _ _ _ _ _ _ _ _ _


❍ Not known

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.3.2 Codes of Conduct: Systems/ procedures

What mechanisms are in place to assure effective implementation of your company's codes of conduct (e.g.compliance system)?✓ ✓ Responsibilities, accountabilities and reporting lines are systemically defined in all divisions and group

companies.

✓ Dedicated help desks, focal points, ombudsman, hot lines.

✓ Compliance linked to employee remuneration

✓ Employee performance appraisal systems integrates compliance/codes of conduct.

✓ Disciplinary actions in case of breach, i.e. warning, dismissal, zero tolerance policy.

✓ Compliance system is certified/audited/verified by third party, please specify: We have several compliancecontrol tools in place. Nestlé Group Audit (see presentation in reference), KPMG (see p.21 of our NestléCorporate Business Principles) As part of the Nestlé Environmental Management System (NEMS), internalaudits are conducted to assess compliance with legal and internal environmental requirements. Specificenvironmental surveys are conducted from our international head-office on a periodical basis to identifypossible gaps, existing or foreseen, and close or prevent them. Besides, a procedure is in place to reportsystematically cases of non-compliance to national and international head-offices together with relatedcorrective action plan. In addition, plants may be ISO14001 certified by 3rd party. The same exists forhealth and safety at work as part of the Nestlé Occupational Safety and Health management systemand for food safety and quality as part of the Nestlé Quality System. Plants may be OSHAS 18001 andISO 9000 certified by 3rd party. CARE, a group-wide audit initiative launched in 2005, aims throughindependant external auditors at verifying that our operations comply with local legislation and with NestléCorporate Business Principles in the areas of Health & Safety, Labor standards, Business Integrity andEnvironment (see attached Executive Summary and Audit Report template). Section 14 of the Code ofBusiness Conduct asks employees to report any practices or actions believed to be inappropriate underthe Code or illegal. Those reports should be made to line management, the HR, Legal or Compliancefunction. Section 14 further states that such complaints, if appropriate, may be made directly to higherlevels, including the Group's Chief Compliance Officer and/or Chief Executive Officer. Depending on thenature of the complaint, Nestlé will assign the investigation internally or externally. If assigned internally, itwill consitute a case handling team which will investigate the complaints and propose a mode of resolution.Nestlé believes in transparency, promotes an environment of open communication and condemns anyform of retaliation against employees who make a report in good faith. Accordingly, employees areencouraged to bring complaints to the attention of their line management, the HR, Legal or Compliance



Function. All of the aforesaid are fully aware of the need to treat any such complaint with the highestpossible level of confidentiality. Moreover, Nestlé recognizes that employees may in some instancesfeel uncomfortable to file complaints openly. The Company respects such need or perceived need foranonymity and therefore provides employees with the opportunity to make complaints on a confidentialbasis or through employee hotlines. For investigation purposes, Nestlé will not distinguish between reportsfiled openly and those filed on a confidential basis.

❍ No such systems/policies in place.


❍ Not known

Comment :In addition, we have an internal self-assessment tool as well as CARE, and internal audit processes whichincludes and integrity module.

1.3.3 Corruption&Bribery: Scope of Policy

Please indicate which of the following aspects are covered by your anti-corruption and bribery policy at a grouplevel (including subsidiaries). Please refer also to the helptext in the information button. Please attach references.

✓ ✓ Bribes in any form, including kickbacks, on any portion of contract payments or soft dollar practices.

✓ Direct or indirect political contributions.

❏ Political contributions publicly disclosed. Please attach supporting documents and/or indicate webaddress: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❏ Charitable contributions and sponsorship.

❏ Charitable contributions and sponsorship publicly disclosed. Please attach supporting documents and/orindicate web address: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❍ Group-wide anti-corruption & bribery policy to be implemented within the next (months)_ _ _ _ _ _ _ _ _ _

❍ No anti-corruption & bribery policy.

❍ Not known


Comment :



_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.3.4 Codes of Conduct/Anti-Corruption&Bribery: business relationships

Please indicate the percentage of coverage of your codes of conduct and anti-corruption and bribery policyrelative to the total number of:✓ ✓ Employees group-/worldwide: 100

✓ Contractors/Suppliers/Service providers: 100

✓ Subsidiaries: 100

✓ Joint venture (includes stakes below 51%) :100


❍ Not known

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.3.5 Codes of Conduct/Corruption&Bribery: Reporting on breaches

Does your company publicly report on breaches (e.g. number of breaches, cases etc) against your codes ofconduct/ethics and anti-corruption and bribery policy? Please attach documents and/or web address.

❍ Yes, please refer to the document(s) attached: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _✓ No


❍ Not known

Comment :



As we believe that statistics can be misinterpreted, Nestlé fully focuses on investigating, handling and resolvingany potential issues, while prohibiting retaliation against the reporting party (if applicable) and at the same timeprotecting the rights of any incriminated person.

1.3.6 MSA Codes of Conduct/Corruption


1.4 Innovation Management

1.4.1 R&D Spending

Please provide us with R&D spending from 2006 to 2009:

✓ Unit 2006 2007 2008 2009

Internal R&Dspending

million USD _ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

Outsourced R&Dspending(financed bycompany, i.e.open innovation)

million USD _ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

Total R&Dspending

million USD 1529 MillionUSD

1654 MillionUSD

1744 MillionUSD

1783 MillionUSD

Of which, ownpersonnel cost

million USD _ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _



Number of R&Dpositions

FTE's 4500 4800 5000 5200

❍ Not applicable. Please provide an explanation in the comment box below

❍ Not known

Comment :For best practice Corporate Governance reasons, we are not able to provide all the answers for this section, asthese are not made public and we cannot favor one shareholder over another by giving them confidential data.R&D spend including the pharma segment. Number of positions excluding the pharma segment.

1.4.2 Open Innovation

Which approaches have you adopted to profit from or contribute to external knowledge. Please provide examplesand add supporting documents.

✓ ✓ R&D collaborations with external business partners (i.e. suppliers, universities, joint ventures)_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

✓ Distributed creativity (i.e. customer design contests, crowd sourcing, open innovation networks)Eg IdeaStore™ brings together people from diverse disciplines in order to brainstorm and prioritise ideas –and identify one or two with the potential for commercial success.

✓ Acquisitionshttp://www.nestle.com/MediaCenter/Presentations/Mergers_Acquisitions/Mergers_Acquisitions.htm

✓ Corporate Venture CapitalEstablished in 2002 - http://www.nestle.com/MediaCenter/PressReleases/AllPressReleases/VentureCapitalFund-5Mar02.htm?Tab=2002

✓ Spin-offs, Start-ups_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

✓ Technology licensing_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❏ Open source_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❏ Other_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❍ Not applicable. Please provide an explanation in the comment box below

❍ Not known

Comment :



_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

1.4.3 R&D Breakdown and KPI

Please indicate breakdown in R&D investments, development cycles, success rates, and KPIs for variousinnovation stages (please provide supporting documents)✓ If the data cannot be aggregated at the company level, indicate which business unit you have chosen to

represents, as well as the number of employees and revenues generated by that unit (in % of total revenues):_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _Please, indicate the % of your total R&D expenditure for which you would be able to provide a similar detailedset of data:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _Share of R&Dbudget invested(in %)

Innovationstages

Processesapplied withinstages (pleaseindicate otherprocesses)

Average cycle ofeach innovationstage (inmonths)

Average successrate (survivalrate from onestage to thenext, in %)

KeyPerformanceIndicators used

Core or BasicResearch

1) Core or BasicResearch /Development



25 Core Research(no direct orimmediatecommercialbenefits)

❏ Technicalfeasibilitystudy

❏ Marketresearch(e.g. voiceof customeranalysis)

❏ Manufacturingfeasibilitystudy

❏ Environmentalimpactassessment

❏ Businesscase

❏ Alignment ofproject withcorporatestrategy

❏ Other, pleasespecify:_ _ _ _ _ __ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

Ideationor AppliedResearch

1*) Ideationor AppliedResearch /Development



_ _ _ _ _ _ Idea generation ❏ Technicalfeasibilitystudy




❏ Businesscase



_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

Development 2) Development /Launch



_ _ _ _ _ _ ProductInnovations -products newto the company(see definitionin Informationbutton)





❏ Businesscase



_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _



_ _ _ _ _ _ ProductOptimizations- of alreadycommercializedproducts (seedefinition inInformationbutton)





❏ Businesscase



_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _



_ _ _ _ _ _ ProcessInnovations -processes newto the company(see definitionin Informationbutton)





❏ Businesscase



_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _



_ _ _ _ _ _ ProcessOptimizations- of alreadyoperationalprocesses (seedefinition inInformationbutton)





❏ Businesscase



_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

Launch 3) Launch /3 years afterlaunch

_ _ _ _ _ _ Productcommercializationor processimplementation

❏ Other, pleasespecify:_ _ _ _ __ _ _ _ _ __ _ _ _

_ _ _ _ _ _ __ _ _

Share ofproducts/processes stillexisting 3 yearsafter launch (in%)_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

Post Launch Post Launch



CustomerService

❏ Customersupportservice inplace

❏ Customersatisfactionanalysisconducted

❏ Other, pleasespecify:_ _ _ _ _ __ _ _ _ _ __ _ _ _ _ __ _

_ _ _ _ _ _ ProjectEvaluation -e.g. evaluationof productdevelopmentprocess

❏ Post-mortemanalysis:evaluation ofdevelopmentprocess

❏ Voice ofcustomeranalysis

❏ Return oninnovationspending


_ _ _ _ _ _ __ _ _

_ _ _ _ _ _ __ _ _

Total: 100%

1) Share of surviving projects from the Core Research to the Development Stage1*) Share of surviving projects from the Ideation to the Development Stage2) Share of surviving projects from the Development to the Launch Stage3) Share of surviving projects from the Launch Stage to 3 years after launch


❍ Not known

Comment :Nestlé allocates its R&D resources in general as follows: 25% basic/early research and development, 50% forproduct/process development and 25% deployment/technical assistance. For all innovation projects we follow astrict stage gate process: I Strategy, II Ideation, III Exploration/conceptualisation, IV Development, V Deployment/launch, VI Post-launch assessment. For best practice Corporate Governance reasons, we are not able to provideall the answers for this section, as these are not made public and we cannot favor one shareholder over another



by giving them confidential data. For best practice Corporate Governance reasons, we are not able to provide allthe answers for this section, as these are not made public and we cannot favor one shareholder over another bygiving them confidential data. For best practice Corporate Governance reasons, we are not able to provide all theanswers for this section, as this is not made public and we cannot favor one shareholder over another by givingthem confidential data.

1.4.4 Structures and Mechanisms

What structures and mechanisms are in place to promote and evaluate the innovation process (not yet mentionedabove) e.g. management tools, formal innovation management systems and incentive schemes?✓ ✓ Responsibilities and reporting lines systematically defined.

✓ Formal R&D and innovation committee in place.

✓ Platforms provided to support innovation process (e.g. specific intranet, dedicated meetings, time slots for"rock turning projects" brown bag seminars).

✓ Incentive schemes and awards provided to employees with innovative ideas (e.g. engagement scorecardlinked to remuneration).

✓ Tracking number of patents/patent families registered globally.

✓ Tracking quality of patents/patent families registered globally (citations, …)

✓ Tracking number of publications by own researches in peer-reviewed journals/conferences.

✓ Tracking citations of own publications

❏ Other, please specify:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❍ Not applicable. Please provide explanation in the comment box below.

❍ Not known

Comment :We track the number of patents, and the quality of our patent portfolio by assessing potential use, businessinterest etc. We also track the number of Invention Disclosures.

1.4.5 Product Innovations

Product innovations: revenues generated by your company last FY, which can be allocated to the followingproduct types.

✓ ✓ Please specify number of years of a typical innovation cycle:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _



❏ Share of revenue (in %)

Newly commercialized products or services*(launched during the previous X years)

_ _ _ _ _ _

Significantly improved products or services**(launched during the previous X years)

_ _ _ _ _ _

Unchanged or minimally changed products orservices (launched during the previous X years)

_ _ _ _ _ _

Total: 100%

❍ Not applicable. Please provide explanation in comment box below.

❍ Not known

Comment :There is no typical number of years for an innovation cycle - see slide 7 for an example of annual innovation inCoffee Mate at http://www.nestle.com/Resource.axd?Id=B8A19E1C-A7A9-4BCD-B0DE-343812762D64 CSVReport 2009 - 71% of total sales meet or exceed Nestlé's Nutritional Foundation profiling criteria. 7,252 productsrenovated for nutrition or health considerations. For best practice Corporate Governance reasons, we are not ableto provide all the answers for this section, as these are not made public and we cannot favor one shareholderover another by giving them confidential data.

1.4.6 Process Innovations

Please indicate if this applies to your company.

✓ ✓ The company has introduced process innovations*** between 2007-2009.

✓ If yes, have these process innovations substantially contributed to a reduction of the cost of production?

❏ If yes, cost reductions in 2009 due to these new processes have amounted to approximately which % ofyour COGS_ _ _ _ _ _ _ _ _ _

❏ Please provide other reasons than cost reductions for the introduction of process innovations in 2009:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _


❍ Not known

Comment :Nestlé Continuing Excellence intiative - various examples related to process improvements - source: http://www.nestle.com/Resource.axd?Id=34D6AE74-E559-49A1-A8F6-5D8838B893A0 For best practice Corporate



Governance reasons, we are not able to provide all the answers for this section, as these are not made publicand we cannot favor one shareholder over another by giving them confidential data. For best practice CorporateGovernance reasons, we are not able to provide all the answers for this section, as these are not made publicand we cannot favor one shareholder over another by giving them confidential data. For best practice CorporateGovernance reasons, we are not able to provide all the answers for this section, as this is not made public and wecannot favor one shareholder over another by giving them confidential data.

1.4.7 Environmental Innovation

What share of all product or process innovations has a clear focus on environmental issues?Please count only if the main objective were environmental issues.✓ 2007 2008 2009

Environmental productinnovations versus totalproduct innovationslaunched (in %)

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Environmental processinnovations versus totalprocess innovationslaunched (in %)

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

% of revenues generatedby your company whichcan be allocated toenvironmental innovations

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Please provide one or two examples of a typical environmental innovation introduced in the past 5 years.Please provide supporting documentsSee examples on page 25 of the R&D brochure. See also slide 17 of Investors presentation on InnovationPlease indicate your company’s KPIs used to measure the environmental performance or efficiency ofinnovations: e.g. virtual water content, grey energy content, customer CO2 abatement. Please providesupporting documents.See attached lists


❍ Not known

Comment :For best practice Corporate Governance reasons, we are not able to provide all the answers for this section, asthese are not made public and we cannot favor one shareholder over another by giving them confidential data.



1.4.8 Social Innovation

What share of all product or process innovations has a clear focus on social issues? Please count only if the mainobjective were social issues.✓ 2007 2008 2009

Social product innovationsversus total productinnovations or serviceslaunched (in %)

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Social processinnovations versus totalprocess innovationslaunched (in %)

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

% of revenues generatedby your company whichcan be allocated to socialinnovations

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Please provide one or two examples of a typical social innovation introduced in the past 5 years. Pleaseprovide supporting documentsPopularly positioned products, fortified products, meeting specific nutrit needs of vulnerable people in society(eg infants and the elderly)Please indicate your company’s KPIs used to measure the performance or efficiency of social innovations.Please provide supporting documents.Nestlé Nutrition business (sales volume, CHF million) Popularly Positioned Product SKUs PopularlyPositioned Products (sales volume, CHF million) Products with increase in nutritious ingredients


❍ Not known

Comment :For best practice Corporate Governance reasons, we are not able to provide all the answers for this section, asthese are not made public and we cannot favor one shareholder over another by giving them confidential data.

1.5 Health & Nutrition

1.5.1 Development of Health & Nutrition Strategy

Please indicate your company's strategic approach to Health & Nutrition. Please refer in the following answers toyour private label products.✓ ✓ Policy statement on health & nutrition publicly available. Please attach the relevant document and/or

indicate website:



Our signature, GOOD FOOD GOOD LIFE, captures the very essence of Nestlé and the promise wecommit ourselves to everyday, everywhere as the LEADING NUTRITION, HEALTH & WELLNESSCOMPANY. See: - 2009 Management Report, The Nestlé Roadmap to Good Food Good Life, p.8 - 2009Creating Shared Value report, Areas of focus and engagement, p.4 The EXECUTIVE BOARD monitorsNHW KPIs, eg: nutritionally-profiled and nutritionally-renovated products, product labels featuring theNestlé Nutritional Compass® and/or GDA labeling on the front of pack, product advertisements andconsumer communications featuring proper nutrition contents, continuous nutrition training of the businessteams and outreach of our NHW education programs into communities where we operate. Our NHWDASHBOARD is now deployed to monitor NHW value evolution of the product portfolio. We also furtherupdated POLICIES, GUIDELINES, TOOLS & PROGRAMMES to drive more NHW for consumers.

✓ Advisory panel on health & nutrition established. Please attach the relevant document and/or indicatewebsite:The NESTLE NUTRITION COUNCIL is an independent, international advisory panel with now 32 yearsof history. Over the last decade only, the NNC has examined NUTRITION & HEALTH ISSUES such asdiabetes, childhood obesity, cancer, nutrition and the brain, and health economics, to name just a few. Ithas also shaped Nestlé's NUTRITION & HEALTH POLICIES on the reduction of saturated fats, trans fattyacids, salt and sugar levels in products, and the fortification in relevant nutrients. See: - Nestlé Researchwebsite: http://www.research.nestle.com/ - Nestlé Research section in the Nestlé corporate website:www.nestle.com/nestleresearch

✓ R&D centers focused on health & nutrition established. Please attach the relevant document and/orindicate website:NESTLE RESEARCH is a global network of 28 R&D centres and Product Technology Centres (PTCs),supported by 280 'Application Groups' across countries where we manufacture products. All with noexception have a HEALTH & NUTRITION AGENDA, since the innovation and renovation pipelinedelivers against the core objective of the Company to lead in this area. Nestlé continues to fosterINNOVATION PARTNERSHIPS with business partners and has established 385 COLLABORATION WITHUNIVERSITIES to ACCELERATE NHW INNOVATION. Additionally, through our NESTLE GROWTHFUND, we invested CHF 742 millions in 2009 in promising new businesses active in health, well-being andnutrition. See: - 2009 Creating Shared Value Report, p.28, at http://www.nestle.com - Nestlé Researchwebsite: http://www.research.nestle.com/ - Nestlé Research section in the Nestlé corporate website: http://www.nestle.com/NestleResearch/GlobalRnD/GlobalRnD.htm

✓ R&D health & nutrition focus area defined. Please attach the relevant document and/or indicate website:Research priorities at Nestlé cover OBESITY PREVENTION and HEALTHY WEIGHT MANAGEMENT,as well as better ways of meeting NUTRITION REQUIREMENTS of consumer groups with SPECIFICNEEDS. These include: healthy GROWTH for an optimal life capital, better maintainance for the AGINGadult and BONE & JOINT health; BIOAVAILABILITY of key nutrients and technological solutions forsafe and efficient food FORTIFICATION; SATIETY, appetite management, blood glucose management,and overall nutrition for improved PERFORMANCE, both physical and mental, as well as improvedRECOVERY for the ill; NUTRIGENOMICS and personalised nutrition, ALLERGY prevention, protectionvia PROBIOTICS; consumer beliefs, attitudes, motivations and barriers in relation to ADOPTING AHEALTHIER DIET. See: - Nestlé Research website: http://www.research.nestle.com/ - Nestlé Researchsection in the Nestlé corporate website: www.nestle.com/nestleresearch

✓ Measurable "healthy nutrition" criteria defined for product innovations. Please attach the relevantdocument and/or indicate website:Nestlé PUBLISHED IN 2008 its comprehensive approach to nutritional profiling, drivingboth innovations and existing portfolio renovations. DETAILED PRINCIPLES & CRITERIAare available at: - http://www.nestle.com/CSV - http://www.nestle.com/Resource.axd?Id=6FFA7201-1191-48E2-BE23-4BE4769B226E - http://www.nestle.com/Resource.axd?Id=4655AC45-7578-4E94-9B43-1B66EBF32D79 - http://www.research.nestle.com/Science+in+Action/NestleNutritionalProfiling/ - short document titled NESTLE NUTRITIONAL PROFILING IN BRIEF, as wellas tables listing exact criteria, attached in the References section. Products reaching the Nestlé 'NutritionalFoundation' level are APPROPRIATE CHOICES in the context of a BALANCED DIET for the majority



of people even when consumed very regularly. A product not achieving the Nestlé NF and consumedfrequently may need to be rebalanced by other dietary choices, eg: frequent consumption of salty snackscalls for moderate use of table salt and other salty foods.

✓ Measurable "healthy nutrition" criteria defined to measure nutritional progress of existing product portfolio.Please attach the relevant document and/or indicate website:Nestlé PUBLISHED IN 2008 its comprehensive approach to nutritional profiling, drivingboth innovations and existing portfolio renovations. DETAILED PRINCIPLES & CRITERIAare available at: - http://www.nestle.com/CSV - http://www.nestle.com/Resource.axd?Id=6FFA7201-1191-48E2-BE23-4BE4769B226E - http://www.nestle.com/Resource.axd?Id=4655AC45-7578-4E94-9B43-1B66EBF32D79 - http://www.research.nestle.com/Science+in+Action/NestleNutritionalProfiling/ - short document titled NESTLE NUTRITIONAL PROFILING IN BRIEF, as wellas tables listing exact criteria, attached in the References section. Products reaching the Nestlé 'NutritionalFoundation' level are APPROPRIATE CHOICES in the context of a BALANCED DIET for the majorityof people even when consumed very regularly. A product not achieving the Nestlé NF and consumedfrequently may need to be rebalanced by other dietary choices, eg: frequent consumption of salty snackscalls for moderate use of table salt and other salty foods.

❍ No such approaches.


❍ Not known

Comment :Three additional points relating to Health & Nutrition Strategy at Nestlé: - PORTION GUIDANCE is a highpriority in Nestlé's NHW strategy. Correct portion size and frequency of consumption are key public healthconsiderations as populations struggle with rising obesity problems and/or deficient intake of essential nutrients,even in affluent societies. In addition to our NUTRITIONAL PROFILING based on appropriate portion sizes forthe intended consumer, and our NUTRITION COMPASS on product packagings which guides consumers onappropriate usage of the product in a balanced diet, we develop our brands and products to precisely deliverportion guidance beyond on-pack portion size declaration. Early estimates at end 2009 indicated that productsempowering consumers with portion guidance represented sales of at least CHF 21 billions (audited by BureauVeritas and published in our 2009 Creating Shared Value Report, see documents). Review of the entire portfoliofor thoroughly scoping products is underway, as well as more portion guidance research and specific trainingof product developers & marketers. - We have entirely reviewed and enriched the NUTRITION & HEALTHASPECTS of our internal AUDIT process. - A new exhaustive digitally-supported MARKETING BEST PRACTICEPROGRAM is being implemented worldwide to align all brand builders on tools and processes for increasing theNUTRITION, HEALTH & WELLNESS VALUE OF PRODUCTS FOR CONSUMERS.

1.5.2 Health & Nutrition reformulation programme for existing products

Please indicate the status of your company's health & nutrition product renovation/reformulation program forEXISTING PRODUCT LINES based on your company's defined "healthy nutrition" criteria. Please refer in thefollowing answers to your private label products.

✓ Health & nutrition product reformulation program IMPLEMENTED:42% of existing products screened and reformulated by the end of fiscal year 2009. Please attach the relevantdocuments and/or website:See: 2009 Creating Shared Value Report, p.26, and pp. 32-33.



❍ Health & nutrition product reformulation program in PLANNING PROCESS. Please attach the relevantdocuments and/or website:_ _ _ _ _ _ _ _ _ _

❍ No such program in place.


❍ Not known

Comment :An incremental 42% of our products have been assessed (vs. 40% in 2009) and 14% of those have beenrenovated (14% also in 2009). Figures gathered from approximately 75% of our product development centresare the following: 7252 PRODUCTS RENOVATED FOR NUTRITION OR HEALTH CONSIDERATIONS (vs.6254 in 2008 with the same scope), of which 3878 with an increase in nutritious ingredients or essential nutrients,and 3374 with a reduction of sodium, sugars, trans fatty acids, total fat or artificial colourings. In 2009, we havecontinued deploying our strenghtened RECIPE MANAGEMENT SYSTEM, which will allow tracking of a widevariety of nutrition and health specifics when all ingredients and recipes worldwide are uploaded using commoncriteria and platform. This deployment is one of the top key initiatives DRIVEN BY THE EXECUTIVE BOARD(unpublished confidential information).

1.5.3 Health & Nutrition product innovation capabilities for NEW products

Please indicate your company's health & nutrition PRODUCT INNOVATIONS (based on your company's "healthynutrition" criteria definition) as a % of total product innovations.

✓ Criteria 2006 2007 2008 2009 Target for 2010

Number of"HealthyNutrition"productinnovationsaccording toyour company'sdefinition

_ _ _ _ _ _ _ _ _ _ 944 1019 _ _ _ _ _

% of health &nutrition productinnovations oftotal productinnovations

_ _ _ _ _ _ _ _ _ _ 67 68 _ _ _ _ _

❍ No such product innovations.


❍ Not known

Comment :A 'product' can have several variants (formats, flavours, etc.) and be sold in many different countries withadapted labeling. For this reason, we track the SALES VOLUME of SKUs delivering health & nutrition for



MORE ACCURACY. We believe this better reflects our INCREMENTAL NUTRITION & HEALTH IMPRINT ONCONSUMERS' DIETS worldwide. In 2009, we sold 1019 CHF Mio worth of new products meeting all NutritionalFoundation criteria or a factual and consumer-relevant nutritional competitive advantage against competitorproducts, vs. 944 CHF Mio in 2008 (7.9% increase).

1.5.4 Marketing Self-Regulation on Health & Nutrition

Please indicate your company's approach towards marketing self-regulation with regards to health & nutritioninformation facts on product labelling. Please refer in the following answers to your private label products.

✓ Use of EU CIAA Nutrition Labelling Scheme, implemented for 91% of total product lines.

❍ Company-specific health & nutrition labelling scheme. Implemented for _ _ _ _ _ _ _ _ _ _ % of totalproduct lines.Please provide a brief description of the key elements and/or attach the relevant document:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❍ No corporate-wide self-regulation labelling approach in place.


❍ Not known

Comment :By end 2009, GDA (Guideline Daily Amount) front-of pack labeling was on 91% of all Nestlé packs reachingconsumers in EUROPE (vs. 88% end 2008). Beyond the EU commitment, deployment of such labeling ispromoted as best practice and SPREADING ACROSS NESTLE. See: - our 2009 Creating Shared Value Report,p. 43 - www.eu-pledge.eu Nestlé also launched in 2005 an on-pack NUTRITIONAL COMPASS ® to guideconsumers through understanding nutrients, percents, and balanced usage of the product. At end 2009, thisCONSUMER-ENGAGING NUTRITIONAL LABELING was featured on 98% OF ALL OUR PACKS WORLDWIDE.We aim to MAINTAIN at least this level, even with a HIGH RATE OF PACK RENEWAL and new productlaunches. See: - our 2009 Creating Shared Value Report, p. 41 - a factsheet about the Nutritional Compass® attached in the References section. RESPONSIBLE ADVERTISING to CHILDREN has always been part ofNestlé’s wider Consumer Communication Principles, which are aimed at encouraging moderation, healthy eatinghabits and physical activity without undermining the authority of parents or creating unrealistic expectationsof popularity or success. We strengthened these Principles in July 2007 with two important provisions, whichwere fully implemented by the end of 2008: no advertising or marketing activity directed at children under 6years old, and advertising for children aged 6-12 restricted to products that help children to achieve a healthybalanced diet, including clear limits for sugar, salt and fat contents. See: - our 2009 Creating Shared ValueReport, pp. 42-43 Nestlé had, by end January 2009, joined five voluntary, independently monitored initiativeson responsible food and beverages advertising at a national and regional level. NESTLE's PERFORMANCE INRELATION TO RESPONSIBLE ADVERTISING has been confirmed as VERY HIGH OVERALL, eg: 97.98% reIFBA commitment, 98.1% in EASA/WFA survey. See: - our 2009 Creating Shared Value Report, p. 43 Nestlé alsodeveloped and widely promoted in 2009 a much strengthened STANDARD (internal mandatory principles andprocesses – competitive information) for DEVELOPING NUTRITION, HEALTH AND WELLNESS CLAIMS. Inparallel, we continually pursue our vast internal NUTRITION TRAINING PROGRAM (NQ ®, for Nutrition Quotient)and had reached MORE THAN 121 000 EMPLOYEES AROUND THE WORLD by end 2009. In view of their keyrole in adding more nutrition, health and wellness in products and communications, MARKETERS now receive



regular ‘NQ Boosters’ on top of whole-day workshops to keep updated. See: - our 2009 Creating Shared ValueReport, p. 41

1.5.5 MSA: Health & Nutrition


1.6 Strategy for Emerging Markets

1.6.1 Revenues and strategy in emerging markets

Please indicate your company's percentage of revenues generated in emerging markets compared to totalcorporate revenues. Please attach your company's business development strategy for emerging markets.

✓ Year 2006 2007 2008 2009 Target 2010 Explain trendand target2010



Revenues 30 35 35 35 35 Emergingmarketsaccountfor 82% ofthe world'spopulation*and 35% ofNestlé sales.(*Based ondata fromPopulationDivision of theDepartment ofEconomic andSocial Affairsof the UnitedNationsSecretariat,WorldPopulationProspects:The 2008Revision,http://esa.un.org/unpp).Referringto slide 3of the 2010Managementpresentation(in attachedreferencedocuments),you cansee ourhistoric resultsand futureprojectionsfor sales fromEmergingMarkets. Weanticipate45% of oursales tocome fromEmergingMarkets by2020.

❍ Company operates only on local or national level. Please indicate revenue growth per year:_ _ _ _ _ _ _ _ _ _




❍ Not known

Comment :Business development strategies are tailored by market. See Ninho Rode Brasil UR link in references to seecreative approach to reach 18 communities in the poor, highly populated northeast region of Brazil - givingfamilies a unique, memorable experience while sampling and familarizing them to Nestle products and helpinglocal retailers develop Nestle sales.

1.6.2 Employement of expatriate people in Emerging Markets

Please indicate your company's target for the maximum percentage of expatriate employees working in emergingmarkets:

❍ Category Percent of expatriate employees

executives/top managers _ _ _ _ _ _ _ _ _ _

middle/general managers _ _ _ _ _ _ _ _ _ _firstline/supervisors _ _ _ _ _ _ _ _ _ _specialist groups _ _ _ _ _ _ _ _ _ _

✓ Not applicable. Please provide explanations in the comment box below.

❍ Not known

Comment :A target is not suitable for Nestlé given the complexity of the business, decentralized nature of organization andsheer number of countries and emerging markets where Nestlé does business. Nestlé’s approach is to keeptrack of expatriate numbers in emerging markets and to appoint the appropriate management to select roles inemerging markets. Nestlé has more than 278 000 employees worldwide in more than 100 countries (Europe 33.9% - Americas 38 %, Asia, Oceania and Africa 28.1 %). Nestlé has a total of 2’100 expatriates, 61 % of them arebased in developed markets, 39 % in emerging countries. Expatriates of all categories (Executive/Top Managers,Middle/General Managers, Firstline/Supervisors and Specialists) based in emerging countries represent globally0.60% of the total Nestlé headcount in these markets (1.8 % of their white collar population). Nestlé’s expatriatepopulation is very diverse. Out of the 2’100 expatriates, 70 % are from developed markets, 30 % from emergingcountries. Both categories are appointed in developed or emerging markets, based on their competencies, skills,professional experience or development needs. Additionally, an increasing number of employees from emergingmarkets are sent on short term missions abroad for further exposure and knowledge transfer, to both emergingor developed markets and in particular to our Headquarters in Switzerland where 40 % of the present missionassignees come from emerging markets. Our global presence, high international mobility, cultural diversity,training and transfer of best practices help ensure a positive blend of people and talent to support sustainedgrowth in all the markets where Nestlé operates.



1.6.3 Internal Management of Knowledge / Processes / Technology transfer

How does your company ensure the transfer of knowledge, skills and technology from headquarters to itsemerging markets operations? Please provide supporting documents.

✓ ✓ Standardized information systems and technology implemented for95% of total Emerging Market revenues.

✓ Shared processes including business excellence best-practices implemented for100% of total Emerging Market revenues.

✓ Data standards and data management implemented for95 % of total Emerging Market revenues.

✓ Headquarter responsibility for management skills training for local top & middle management level, pleaseprovide supporting documents.

❍ No systematic knowledge transfer approach in place.


❍ Not known

Comment :Emerging Markets (EM) benefit as any other market from the WORLDWIDE KNOWLEDGE AND TRAININGNETWORKS. NESTEC (Worldwide HQ Technical Assistance to Nestlé Operating Companies in the countries)ensures the adequate knowledge transfer from HQ to the Markets. Nestec covers all functions & categoriesof our businesses: Marketing & Sales, Procurement, Supply Chain, Technical & Production, R&D, Finance &Control, Human Resources, IS/IT. EMs have access information and knowledge on NESTEC INTRANET andthe various REPOSITORIES. All Functions use SharePoints/TeamRooms to share knowledge amongst ExpertCommunities IS/IT GLOBE is now largely implemented across all Nestlé business operations and is based on3 pillars: DATA STANDARDISATION; implementation of BEST PRACTICES; implementation of a STANDARDINFORMATION SYSTEM (SAP). In April 2009, GLOBE implementation in EM was 95% of NPS (see detailedcalculation in reference). PEOPLE / TRAINING & DEVELOPMENT - HR is structured globally for clear verticalchannel of knowledge. Corporate HR, & EMs mirror Centres of Expertise that enables Functional expertise& communities sharing knowledge vertically and horizontally (Example: Talent management at Corporate &Market level). Every year EMs also produce People Plans that enable them to communicate Business & Peopleneeds up the chain E-LEARNING PROGRAMMES, EM have access to the same learning curriculum and theyare following the same pattern of education as other countries. Among hundreds of general e-courses offeredat global level on all functional areas available in 5 languages, there are 294 especially developed for Nestlé.NESTLE "RIVE REINE" INTERNATIONAL TRAINING CENTER - In 2009 offered 95 programs (one or twoweeks duration each). 2657 employees from all over the world attended. 44% of those participants came fromEM. Out of the 95 programs, 45 took place at Rive-Reine itself and 50 were decentralized in various Markets,26 of which were delivered in emerging markets, whereby several of their local managers also play the role ofinstructors/speakers, emulating the spirit of Rive-Reine courses where 75% of speakers are internal experts fromHeadquarters including all members of the Executive Board. EXTERNAL TRAINING PROGRAMMES In 2009,95 managers followed attended IMD, our preferred business school in Switzerland. 33 of them came from EM.At local level, 23 markets (from which 10 EM) use other business schools. INTERNATIONAL TRANSFERS ANDPROJECTS - used extensively to exchange knowledge and skills. 39% of expatriates at the Centre HQ are from



EM while 63% of expatriates from Switzerland are assigned to EM. SHORT TERM MISSION ASSIGNMENTS -6-12 months duration. In 2009, 40% of these missions assignments in Vevey were from EM.

1.6.4 Product adaptation for Emerging Markets

Does your company develop and produce Emerging Markets specific products that meet basic local needs?Please give examples and attach/provide supporting documents.

✓ Yes, applied for _ _ _ _ _ _ _ _ _ _% of product lines compared to total product lines sold in emerging markets.

❍ Yes, implemented on ad-hoc basis but no figures available.

❍ Not yet, but planned by year _ _ _ _ _ _ _ _ _ _❍ No


❍ Not known

Comment :Using science-based solutions, we seek to improve quality of life through food and diet, contributing to the healthand wellbeing of consumers, including those at the “base of the income pyramid” through products with highernutritional value at lower prices. We also aim to generate greater awareness, knowledge and understandingamong consumers. In 2009 Nestle's Popularly Positioned Products amounted to CHF 8.8 bio., representing3950 individual product stock keeping units (SKUs) with continued double-digit sales growth. Our strategy togrow in emerging markets is about meeting the needs of the lower level income groups for nutrition, pack size,pricing, distribution and communication. Over 500 initiatives are underway. With many consumers sufferingfrom key micronutrient deficiencies (iron, vitamin A, zinc, iodine), our products help address needs based onmicronutrient deficiency mapping done with local health authorities. For example we: - sold 100,000 tons ofiodine-enriched bouillon in 2008 making us the world's largest carrier of iodine - sold 94 billion servings of iodinefortified products worldwide in 2009 (19 billion iodine-fortified Maggi cubes are sold in Central West Africa alone)- offer fortified, affordable milks in 60 countries (equallng 17.2 billion servings; 44 billion iron servings, 29 billionVitamin A servings, 13 billion Zinc servings). Nestle invests CHF 12 million a year into direct R&D for dehydratedand liquid milk-based products, and this know-how is applied in affordable milks for emerging markets. See URLlinks in references to short articles on (1) Nutritional profiling, (2) micronutrient fortification, (3) milk fortificationAfrica, (4) access to affordable protein, as well as section starting on page 29 of the 2009 CSV report. Additionalexamples: - See URL link to "Developing products for local tastes in references". - Affordable, nutritious growing-up milk launched in several countries, developed to bridge the gap of the biggest nutrient deficiencies of childrenin emerging markets. For example, Bearbrand Instant powder milk from the Philippines, enhanced with iron,vitamin A, Iodine, vitamin C and zinc is sold at only 8 pesos per serving (sachet of 26gram , 0.17 US$) and widelyavailable in traditional neighborhood stores (see reference 1). - All family cereal porridge in various countries inCentral and West Africa. For example Golden Morn in Nigeria which provides energy, protein, calcium and fibersand is sold at an affordable price (index of 80 versus main competitor, NASCO) (see reference 2). Golden Mornhas also been introduced in Ghana and Ivory Coast and 3 other African markets. - Nestum all family cereal fromMalaysia, sold only in traditional outlets, fortified with vitamins and minerals in line with Malaysia nutrition plan.Sold at less than 0.40US$ per serving (see reference 3) - Brazil factory in Feira de Santana is primarily dedicatedto the manufacturing, packaging, and distribution of emerging market products, aimed at the 50 million consumersin the north east of Brazil (see press release, reference 4 and 5). The factory has created 2000 direct and indirect



jobs in this economically-deprived region of Brazil. Apart from the development, manufacturing and marketingof products targeted to emerging markets, Nestle is also focusing attention to the promotion of good nutrition indeprived areas in these markets. Nutromovil, a mobile nutrition unit in Peru visits consumers near their homegiving advice on nutrition and diet. Similar concepts have been developed in various countries in Latin America,among which Peru, Chile, Venezuela, Colombia, Mexico and the Dominican Republic (see reference 6). Also seereference URL links to: (1) Nutrikid program in Hungary (2) Healthy Thai Kids and (3) Nutrir Brazil as examples ofNestle's extended Healthy Kids program which has already reached 10 million school-age children.

1.6.5 Pricing strategy & responsibility

At which organizational level does your company develop the pricing strategy for emerging markets products?Please give examples and attach/provide supporting documents.

✓ ✓ Corporate level

❏ Regional level

✓ Country level

❍ No explicit pricing strategy for emerging markets.


❍ Not known

Comment :Nestle has developed a general policy regarding the opportunity in emerging markets, laid down in a setof guidelines addressing 3 levers: • acceptability • affordability • availability The 2nd guideline, affordability,addresses the pricing strategy of products in emerging markets: • The price point has to be entirely driven byconsumer value and consumer insights • Pricing of products targeted to the low income consumers should notonly be relative to the price of other available food products, but each product should be priced in relation to ahousehold’s total disposable cash and consumption priorities. The final local pricing decision is taken at MarketHead level and is driven mainly by consumer and shopper insight. We believe that affordability must be madewithout compromise to quality and is only a first step towards designing products that meet the needs of emergingconsumers.

1.6.6 Measuring purchasing power

Does your company measure local purchasing power of low income consumers (<10 USD/day) to ensureaffordability of your products?

✓ Yes, applied for 100% of the Emerging Market countries where company is present.

❍ Yes, implemented on ad-hoc basis but not systematically.



❍ Not yet, but planned by year _ _ _ _ _ _ _ _ _ _❍ No


❍ Not known

Comment :Nestle uses several sources of information regarding purchasing power of the local market. Every market hasaccess to the income-population distribution by country and other relevant data made available through the Nestleintranet. Additional local research is used to obtain insight in the purchasing power of the target group, low incomeconsumers. This insight serves as the basis for developing of emerging markets specific products. See slide 4 inthe Emerging Markets Management conference presentation (attached as document to Question 1.6.1 regardingRevenues and Strategy) showing our global analysis indicating that there will be approximately 1.4 billion moreconsumers in 2016 who will earn over 3000 USD annually and who are likely consumers of Nestle products.

2 Environmental Dimension

2.1 Environmental reporting

2.1.1 Quality of Environmental Reporting

In this section we evaluate the content, context and coverage of the environmental reporting included in otherreports or on your website (e.g. own publication, part of a sustainability/CSR report or of annual report). Theevaluation will be filled in by the responsible analyst of your industry. Please proceed to the next question.

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

2.1.2 Coverage - Environmental

2.1.3 Environmental Reporting - Assurance

2.1.4 Environmental Reporting - Qualitative Data

2.1.5 Environmental Reporting - Quantitative Data

2.2 Environmental Policy/Management System



2.2.1 Corporate Environmental Policy

Has your company adopted a corporate environmental policy? (whether stand alone or integrated into a broaderpolicy statement). Please attach the policy or indicate where it can be found on the web.

✓ Yes, documented in: The Nestlé Policy on Environmental Sustainability Other attached documents:Nestlé Creating Shared Value Report 2009 The Nestlé Corporate Business Principles TheCopenhagen Communiqué on Climate Change The Nestlé Commitments on Water Link tointernet information: http://www2.nestle.com/CSV/WaterAndEnvironmentalSustainability/Pages/WaterAndEnvironmentalSustainability.aspx

❍ No

❍ Policy is in development and to be implemented within the next _ _ _ _ _ _ _ _ _ _ months.


❍ Not known

Comment :Following the early years of Nestlé's commitment to the environment, we published in 1991 our first globalNestlé Policy on the Environment. This Policy defined Nestlé's worldwide strategy on environmental issuesand stated our long-standing commitment to environmentally sound business practices. The Nestlé Policyon the Environment was updated in 1999, confirming and strengthening our commitment. It reflects a worldwhere preserving natural resources and minimising waste has become part of the day-to-day activities in Nestléoperations, as well as an integral element in achieving global competitiveness. The Policy was updated in 2008,and now is named The Nestlé Policy on Environmental Sustainability. It is widely communicated - both internallyand externally - to all interested parties. It helps, in a positive way, to influence others with whom Nestlé hasrelationships throughout the supply chain and beyond. The Nestlé Corporate Business Principles set out the basicrules that we follow to make sure that the highest standards of conduct are maintained. These were updated in2004 and include all ten principles of the UN Secretary General's Global Compact for Business, regarding labourstandards, human rights and the environment. Nestlé also adheres to the International Chamber of Commerce(ICC) Business Charter for Sustainable Development. The company has implemented both public and internalenvironmental policies. Besides, we published the Nestlé Commitments on Water, at the 4th World Water Forumin Mexico in Feb. '06, which include the reduction of the amount of water used per kilo of food and beverageproduced and taking care that water we discharge into the environment is clean, as well as the respect of localwater resources, the promotion of water conservation among farmers and collaboration with others on waterconservation and access. The Company also has signed the UN Global Compact CEO Water Mandate and theBali Communiqué by The Prince of Wales Corporate Leaders Group on Climate Change in 2007. In additionto initiatives such as the Sustainable Agriculture Initiative of the Food Industry (SAI-Platform), through whichmembers engage with their suppliers and help them to improve their environmental performance, Nestlé alsoshares its strategy and results through participation in the Carbon Disclosure Project (CDP) since its creation.This policy of sharing environmental knowledge and best practice is best seen in the company’s award-winningGreening the Supply Chain (GSC) programme in the Philippines, which has helped 182 business partnersdevelop their own environmental management systems (EMS). Ahead of global negotiations about climatechange held in Copenhagen in December 2009, The Prince of Wales’ Corporate Leaders Group on ClimateChange, of which Nestlé is a member, published a short statement calling for an ambitious, robust and equitableglobal deal on climate change that responds credibly to the scale and urgency of the crises facing the worldtoday. The Communiqué, launched at the UN General Assembly Climate Summit in NewYork City in September,was signed by Nestlé’s Chief Executive Officer Paul Bulcke. The statement calls for a global greenhouse gasemissions cap and countries to develop long-term reduction plans for 2013–2050 with interim targets. A similarcall as been issued by CIAA, the European Food Industry Association, of which the Environmental Sustainability



Committee is chaired by Nestlé. Nestlé is also a strategic partner of the University of Cambridge Programme forSustainability Leadership.

2.2.2 Corporate Environmental Policy, areas

Please indicate which of the following options are covered by your group-wide environmental management policy/procedures. Please attach the policy or indicate where it can be found on the web:Attached documents: The Nestlé Policy on Environmental Sustainability 2009 Creating Shared Value ReportNestlé and Water: Sustainability, Protection and Stewardship The Nestlé Supplier Code Corporate BusinessPrinciples✓ ✓ Environmental impact of company's own operations.

✓ Environmental impacts/risks of products & services.

✓ Suppliers & service providers (e.g. contractors).

✓ Other key business partners (e.g. non-managed operations, JV partners, etc.) please specify: JV partners

❍ No environmental policy.


❍ Not known

Comment :Please also see sections: 2.6. form Packaging, 2.7 from the Raw Material Sourcing and 3.7 from the Standardsfor Suppliers

2.2.3 EMS: Certification/Audit/Verification

Please indicate how your environmental management system is verified/audited/certified:✓ ✓ ISO 14001, JIS Q 14001, EMAS certification.

✓ Third party verification/audit/certification by specialized companies.

✓ Verification/audit/certification by company-own specialists from headquarter.

❍ Not verified/audited/certified.


❍ Not known

Comment :In the larger framework of NCE (Nestlé Continuous Excellence) and NIMS (Nestlé Integrated ManagementSystems), implementation of our ISO 14001 compatible with NEMS (Nestle Environmental Management System)is mandatory throughout Nestlé. The Nestlé Environmental Management System has been implementedthroughout the Company since 1996, helping us to achieve continuous performance improvement and contribute



towards sustainable development. 2009 marked the thirteenth anniversary of the NEMS which has served as asolid basis for continuously improving our environmental performance. We have further reinforced our leadershipposition by seeking independent certification of all our factories to the internationally recognised standards. Onthe 31st of May 2010, 398 factories hold an ISO 14001 certificate with the remaining scheduled to obtain theircertificate during this year. Nestlé has been committed to environmentally sound businesses practices throughoutthe world since its early days. The Nestlé Policy on Environmental Sustainability defines our world-wide strategyon environmental issues in response to the environmental commitments made in the Nestlé Corporate Businessprinciples. The NEMS is a a key component of this strategy. The objective of NEMS are to: # ensure compliancewith environmental legislation and Nestlé environmental requirements, # continuously improve the environmentalperformance of Nestlé, # enable certification of factories against ISO 14001 international standard, # contributeto sustainable development. NEMS is completely aligned with the requirements of the international standardISO 14001:2004 #Environmental management system # Requirements with guidance for use#. Every Nestléactivity with a significant impact on the environment must be covered by an environmental management systembased on requirements of NEMS. Each plant is audited on an annual basis. Additionally, all Nestlé factoriesshall obtain and mantain third-party certification against this standard. NEMS applies to the management ofsignificant environmental aspects and impacts and environmental performance in all Nestlé Markets, Globallyand Regionally Managed Businesses and Plants. This includes all Nestlé activities along the supply chain whichmay have either a direct or indirect impact on the environment, including procurement, supply, manufacturing,packaging, distribution, research and product development, marketing and administration. Suppliers, includingcontract farmers, manufacturers and distributors, as well as minority joint ventures, are not required to implementNEMS. Nestlé controls the environmental aspects of these activities relevant to the Company through the NEMScomponents concerning the supply function, including communication, operational control and audits. Compliancewith all NEMS requirements is mandatory. Where these requirements are not currently met, an action plan mustbe established and implemented to achieve compliance. For new acquisitions, a time frame and action plan forachievieng compliance with these requirements shall be established. In addition, all our factories have beenaudited by an independent third party as part of our CARE Program to verify compliance with our CorporateBusiness Principles including the Nestlé Policy on the Environment. Please see the Bureau Veritas IndependentAssurance Statement in: http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf

2.2.4 EMS: Coverage of certification

Please indicate the percentage of sites in terms of revenues generated from business operations undermanagement control verified/audited/certified according to these systems:✓ 100

% of revenues generated from business operations under management control.

❍ Not verified/audited/certified.


❍ Not known

Comment :



_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

2.2.5 MSA Environmental Management


2.3 Operational Eco-Efficiency

2.3.1 EP - Direct Greenhouse Gas Emissions

Please provide your company's direct greenhouse gas emissions (DGHG SCOPE 1) for the part of yourcompany's operations for which you have a reliable and auditable data acquisition and aggregation system.Please refer to the information button for additional information.✓ ✓ DGHG SCOPE

1Unit of analysis FY 2006 FY 2007 FY 2008 FY 2009

Directgreenhouse gasemissions

metric tonsof CO2equivalents

4050000 metrictons CO2e




Data coverage(e.g. as %of revenues,employees, etc.)

percentageof productionvolume

100 100 100 100

❏ In case the data coverage above is less than 100%, please provide best possible estimates of yourcompany's total DGHG SCOPE 1 emissions and explain what was included in your estimates.DGHG SCOPE1

Unit of analysis FY 2006 FY 2007 FY 2008 FY 2009



Estimatedtotal DGHGemissionsfor the entirecorporation(for 100% datacoverage)


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Please describewhat wasadded in theestimates (e.g.business units,geographicalcoverage)

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

✓ THIRD PARTY VERIFICATION✓ The above data has been verified by the following organization: Bureau Veritas Please see the Bureau

Veritas Independent Assurance Statement in: http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf

❍ Not verified

❍ We do not track direct greenhouse gas emissions


❍ Not known

Comment :Bureau Veritas Solutions has been engaged to provide external assurance to the stakeholders of Nestlé SA(Nestlé) over the provision of information relating to its Creating Shared Value (CSV) reporting and programmesin the "Creating Shared Value" section of Nestlé website. Building on previous years, the assurance process wasdesigned to understand how Nestlé identifies its material risks and emerging issues in a continually changingenvironment, and to challenge Nestlé’s in its CSV implementation, performance and reporting. The process hasinvolved interviews and follow-up communication with 48 key management staff predominantly at Nestlé’s HeadOffice in Switzerland, visits (by Bureau Veritas’ global auditor network) to nine operational factories spanningeight countries, to evaluate SHE data management, reliability and accuracy and a visit to Nestlé Brazil to reviewthe understanding and implementation of CSV policies and related processes presented within the CSV sectionof the website at a market level. Please see the Bureau Veritas Independent Assurance Statement in: http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf Nestlé’s priorities on climate change are to continue to: - Improve energy efficiency throughoutour operations - Expand our usage of renewable energy Our energy efficiency efforts also translate into carbonreductions, though historically, we have reduced carbon more than energy due to a number of our factoriesswitching to cleaner fossil fuels such as natural gas, and also renewable sources of energy. We plan to furtherdecouple energy consumption and carbon emissions in the future. These efforts have led to a reduction inour direct greenhouse gas emissions by 3.1% from 2008 levels to 3.98 million tonnes of CO2eq, or 96.57 kgof CO2eq per tonne of product. This equates to a 0.74 million tonne (16%) reduction, or a 48% reduction pertonne of production, in the 10 years from 2000, during which our production volume increased by 63%. It meansthat both absolute total direct greenhouse gas emissions and greenhouse gas emissions per tonne of product



have been continuosly decreasing over the last ten years, by 15.8% and 48.2% respectively. Our indirect CO2emissions from purchased energy remained stable at 3.0 million tonnes compared to 2008.

2.3.2 EP - Indirect Greenhouse Gas Emissions

Please provide your company's indirect greenhouse gas emissions from energy purchased (purchased andconsumed, i.e. without energy trading) (IGHG SCOPE 2) for the part of your company's operations for which youhave a reliable and auditable data acquisition and aggregation system. Please refer to the information button foradditional information.✓ ✓ IGHG SCOPE 2 Unit of analysis FY 2006 FY 2007 FY 2008 FY 2009

Indirectgreenhousegas emissionsfrom energypurchasedand consumed(scope 2)


_ _ _ _ _ _ 3038840 metrictons CO2e





_ _ _ _ _ _ 100 100 100

❏ In case the data coverage above is less than 100%, please provide best possible estimates of yourcompany's total IGHG SCOPE 2 emissions and explain what was included in your estimates.IGHG SCOPE 2 Unit of analysis FY 2006 FY 2007 FY 2008 FY 2009

Estimated totalIGHG emissionsfrom energypurchasedand consumedfor the entirecorporation(for 100% datacoverage)


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

✓ THIRD PARTY VERIFICATION



✓ The above data has been verified by the following organization: Bureau Veritas Please see the BureauVeritas Independent Assurance Statement in: http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf

❍ Not verified

❍ We do not track indirect greenhouse gas emissions


❍ Not known

Comment :Bureau Veritas Solutions has been engaged to provide external assurance to the stakeholders of Nestlé SA(Nestlé) over the provision of information relating to its Creating Shared Value (CSV) reporting and programmesin the "Creating Shared Value" section of Nestlé website. Building on previous years, the assurance process wasdesigned to understand how Nestlé identifies its material risks and emerging issues in a continually changingenvironment, and to challenge Nestlé’s in its CSV implementation, performance and reporting. The process hasinvolved interviews and follow-up communication with 48 key management staff predominantly at Nestlé’s HeadOffice in Switzerland, visits (by Bureau Veritas’ global auditor network) to nine operational factories spanningeight countries, to evaluate SHE data management, reliability and accuracy and a visit to Nestlé Brazil to reviewthe understanding and implementation of CSV policies and related processes presented within the CSV sectionof the website at a market level. Please see the Bureau Veritas Independent Assurance Statement in: http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf Nestlé’s priorities on climate change are to continue to: - Improve energy efficiency throughoutour operations - Expand our usage of renewable energy Our energy efficiency efforts also translate into carbonreductions, though historically, we have reduced carbon more than energy due to a number of our factoriesswitching to cleaner fossil fuels such as natural gas, and also renewable sources of energy. We plan to furtherdecouple energy consumption and carbon emissions in the future. These efforts have led to a reduction in ourdirect greenhouse gas emissions by 3.1% from 2008 levels to 3.98 million tonnes of CO2eq, or 96.57 kg ofCO2eq per tonne of product. This equates to a 0.74 million tonne (16%) reduction, or a 48% reduction per tonneof production, in the 10 years from 2000, during which our production volume increased by 63%. Our indirect CO2emissions from purchased energy remained almost stable at 3.0 million tonnes compared to 2008. Nevertheless,since 2007, first time these figures were published, they have been slightly reducing.

2.3.3 EP - Energy Purchased

Please provide your company's electrical and thermal energy purchased (purchased and consumed, i.e. withoutenergy trading) for the part of your company's operations for which you have a reliable and auditable dataacquisition and aggregation system. In case you are reporting total consumption, indicate it in the comment box.Please refer to the information button for additional information.✓ ✓ ENERGY

PURCHASEDUnit of analysis FY 2006 FY 2007 FY 2008 FY 2009

Electricitypurchased

megawatt hours(MWh)

6345740 MWh 6291504 MWh 6300964 MWh 6290695 MWh



Thermal energypurchased(heat, steam)

megawatt hours(MWh)

491428 MWh 497681 MWh 431698 MWh 435100 MWh

Data coverageregardingenergypurchased(e.g. as %of revenues,employees, etc.)


100 100 100 100

❏ In case the data coverage above is less than 100%, please provide best possible estimates of yourcompany's total energy consumption and specify the missing coverage.ENERGYPURCHASED


Estimatedelectricitypurchasedfor the entirecorporation(for 100% datacoverage)

megawatt hours(MWh)

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Estimatedthermal energypurchasedfor the entirecorporation(for 100% datacoverage)

Megawatt hours(MWh)

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _



❍ Not verified

❍ We do not track energy consumption




❍ Not known

Comment :The reported data in previous CDP Questionnaires in the field of total Energy consumed, Electricity purchasedwas the total energy consumption minos . In 2010, the reported data corresponds to the electricity purchasedminos the total thermal energy purchased, that is why the data is different. Data reported before: Electricitypurchased 2006: 23400000 MWh Electricity purchased 2007: 23200000 MWh Electricity purchased 2006:23700000 MWh The 2006 reported data has been estimated on the basis of the total energy consumed. From2007 onwards, the reported data corresponds to the actual amounts of electricity purchased and thermal energypurchased. Bureau Veritas Solutions has been engaged to provide external assurance to the stakeholders ofNestlé SA (Nestlé) over the provision of information relating to its Creating Shared Value (CSV) reporting andprogrammes in the "Creating Shared Value" section of Nestlé website. Building on previous years, the assuranceprocess was designed to understand how Nestlé identifies its material risks and emerging issues in a continuallychanging environment, and to challenge Nestlé’s in its CSV implementation, performance and reporting. Theprocess has involved interviews and follow-up communication with 48 key management staff predominantly atNestlé’s Head Office in Switzerland, visits (by Bureau Veritas’ global auditor network) to nine operational factoriesspanning eight countries, to evaluate SHE data management, reliability and accuracy and a visit to Nestlé Brazilto review the understanding and implementation of CSV policies and related processes presented within the CSVsection of the website at a market level. Please see the Bureau Veritas Independent Assurance Statement in:http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf In addition to operational efficiency improvements and energy-saving equipment, we willcontinue to explore the industrial feasibility of switching to more renewable energy sources to reduce our CO2emissions and our reliance on fossil fuels; 12.2% of our total on-site energy use has come from renewablesources. A number of projects have come on-stream in 2009 which will increase our overall proportion of energyderived from renewable resources. For example, a landfill gas project at Solon, Ohio, USA, captures methanefrom a local landfill site and uses it as an energy source. Meanwhile, at our Bugalagrande factory in Colombia,the installation of our latest spent coffee grounds fueled boiler allows the recovery of energy from this biomass.This renewable fuel provides 13% of the total energy required in the factory and has 95% lower CO2 emissionsthan the fossil fuel it replaces. Nestle has been implementing this type of technology for the last 30 years, andof our 27 coffee factories where spent grounds are a by-product, 21are equipped with such technology. We arealso planning to replace the boiler at Nestlé France’s facilities in Challerange with a wood-fired boiler. The projectwill result in an 85% reduction in the factory’s CO2 footprint, and save an estimated €9 million over 10 years. Thetiming will also allow us to benefit from government subsidies available for renewable energy schemes, whichwill cover 40% of the cost of the project. The wood supply plan has been approved by the local authorities andis considered to be fully compatible with local wood resources management. As Challerange is a key site for thesupply of quality creamer for Nescafé Dolce Gusto, this project will be a further opportunity for us to communicateabout sustainability through our brands.

2.3.4 EP - Water

Please provide your company’s total water withdrawal (GRI EN8) including a breakdown of the three subitems(salt/brackish water, municipal water, water from other sources), as well as the amount of water discharged atequivalent quality as the raw water extracted. Please also click on the information icon to see what denominatoryou should use for the data to be normalized for your industry and provide the amount for the following years inthe industry-specific denominator row of the table.

✓ ✓ WaterConsumption

Unit of analysis Financial Year2006

Financial Year2007

Financial Year2008

Financial Year2009



Total WaterWithdrawal (GRIEN8, processand coolingwater) (i.e. sumof 3 subitemsbelow)

Million cubicmeters

155 Millioncubic meters




> Subitem: Totalsalt / brackishwater withdrawn

Million cubicmeters

0 Million cubicmeters




> Subitem: Totalmunicipal watersupplies (orfrom other waterutilities)

Million cubicmeters





> Subitem: Totalwater from allother sources

Million cubicmeters





Water returnedto the sourceof extraction atsimilar or higherquality as rawwater extracted

Million cubicmeters





Industry-specificdenominator

See informationicon for thedenominatorused for yourindustry

38240000 41070000 41060000 41170000

Data Coverage(e.g. as %of revenues,employees, etc.)

100 100 100 100 100

❏ In case the data coverage above is less than 100%, please provide best possible estimates of yourcompany's total water withdrawal and explain what was included in your estimates

Unit of analysis Financial Year2006

Financial Year2007

Financial Year2008

Financial Year2009



Estimatedtotal waterwithdrawalfor the entirecorporation(for 100% datacoverage)

Million cubicmeters

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

✓ THIRD PARTY VERIFICATION✓ The above data has been verified by the following organization:

Bureau Veritas Please see the Bureau Veritas Independent Assurance Statement in: http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf

❍ Not verified

❍ We do not track water consumption


❍ Not known

Comment :In the field of Water returned to the source of extraction at similar or higher quality as raw water extracted,we have reported the total water discharge. Bureau Veritas Solutions has been engaged to provide externalassurance to the stakeholders of Nestlé SA (Nestlé) over the provision of information relating to its CreatingShared Value (CSV) reporting and programmes in the "Creating Shared Value" section of Nestlé website. Buildingon previous years, the assurance process was designed to understand how Nestlé identifies its material risksand emerging issues in a continually changing environment, and to challenge Nestlé’s in its CSV implementation,performance and reporting. The process has involved interviews and follow-up communication with 48 keymanagement staff predominantly at Nestlé’s Head Office in Switzerland, visits (by Bureau Veritas’ global auditornetwork) to nine operational factories spanning eight countries, to evaluate SHE data management, reliabilityand accuracy and a visit to Nestlé Brazil to review the understanding and implementation of CSV policies andrelated processes presented within the CSV section of the website at a market level. Please see the BureauVeritas Independent Assurance Statement in: http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf Nestlé aims to be the most efficient water useramong food manufacturers. Both absolute total water withdrawal and water withdrawal per tonne of product havebeen continuously decreasing over the last ten years, by 33% and 58.8% respectively. In 2009, the Companywithdrew 143 million m3 of water, – a decrease of more than 3.2% compared to 2008. This equates to 3.47 m3per tonne of product, 3.5% down on the 2008 level or 3.8% when adjusted for constant production volume; thedifference coming from changes in product mix evolving towards products with more added value, and fromacquisitions and divestitures. Nestlé has also reduced its water withdrawal by 33% since 2000, while our food andbeverage production volume increased by 63%. Our total water withdrawal rate has been improving over recentyears as a result of both extensive efforts by Nestlé engineers, environmental professionals and our employees toreduce water consumption in our operations, and the changing product mix within Nestlé’s portfolio. Our goal is toreduce consumption on a comparable basis by a further 10–15% over the next five years and we plan to develop



more sophisticated and localised metrics for this important area. In the face of growing concerns regardingwater scarcity and its impact, especially on farmers, with estimates that the livelihoods of one-third of the world’spopulation will be affected by water scarcity by 2025, Nestlé’s focus has evolved from simply reducing our waterwithdrawal in our operations to prioritising our efforts and investments to where water is especially scarce. Most ofthe water we withdraw is returned back to nature, including the water treated in our wastewater treatment plants.We reported total water discharge in the field of water returned to the source of extraction at similar or higherquality as raw water extracted.

2.3.5 EP - Waste Generation

Please provide your company's total waste generated (not reused or recycled) for the part of your company'soperations for which you have a reliable and auditable data acquisition and aggregation system. Please refer tothe information button for additional information.✓ ✓ WASTE

GENERATIONUnit of Analysis FY 2006 FY 2007 FY 2008 FY 2009

Total wastegenerated

metric tons 400000 metrictonnes

370000 metrictonnes

410000 metrictonnes

360000 metrictonnes


percentage ofrevenues

100 100 100 100

❏ In case the data coverage above is less than 100%, please provide best possible estimates of yourcompany's total waste generated and explain what was included in your estimates.WASTEGENERATION


Estimatedtotal wastegenerationfor the entirecorporation(for 100% datacoverage)

metric tons _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _


_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _





❍ Not Verified

❍ We do not track waste generated


❍ Not Known

Comment :Bureau Veritas Solutions has been engaged to provide external assurance to the stakeholders of Nestlé SA(Nestlé) over the provision of information relating to its Creating Shared Value (CSV) reporting and programmesin the "Creating Shared Value" section of Nestlé website. Building on previous years, the assurance process wasdesigned to understand how Nestlé identifies its material risks and emerging issues in a continually changingenvironment, and to challenge Nestlé’s in its CSV implementation, performance and reporting. The process hasinvolved interviews and follow-up communication with 48 key management staff predominantly at Nestlé’s HeadOffice in Switzerland, visits (by Bureau Veritas’ global auditor network) to nine operational factories spanningeight countries, to evaluate SHE data management, reliability and accuracy and a visit to Nestlé Brazil to reviewthe understanding and implementation of CSV policies and related processes presented within the CSV sectionof the website at a market level. Please see the Bureau Veritas Independent Assurance Statement in: http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf Eliminating waste in our own operations is an important priority for Nestlé as part of ourcommitment to reduce consumption of natural resources and to reduce food wastage along the value chain. Ourgoal is zero waste and full recovery of unavoidable by products. Through Nestlé Continuous Excellence (NCE)our factories reduced waste by 11.4% and increased reuse or recovery of by products by 23.5% in 2009. Thisamounts to 1.35 million tonnes of by products (6.4% of total material used) sent for reuse or recovery and only0.36 million tonnes (1.7% of total material used) for disposal in landfills or incineration without heat recovery.

2.4 Climate Strategy

2.4.1 GHG Inventory - organizational boundaries

Please indicate the organizational coverage of your company's GHG inventory.✓ ✓ For wholly owned entities/facilities

100% of total revenue.

✓ For entities/facilities that controlled but not wholly owned100% of total revenue.

✓ For jointly controlled assets/entities100% of total revenue.

❏ For entities not controlled but over which the company has significant influence_ _ _ _ _ _ _ _ _ _% of total revenue.

❍ No GHG inventory.




❍ Not known

Comment :Nestlé is committed to being a leader in reducing greenhouse gas emissions from our own operations, withinour supply chain and by helping consumers make a difference. Our ambition is to offer products with the lowestenvironmental impact compared to alternatives, including those prepared at home. As a company with a soundenvironmental track record and a commitment to further improvement, we support strict and fair standards tocurb greenhose gas emissions and natural resource consumption as these will reward the most resource-efficientcompanies and value chains. To optimise the environmental performance of our products, we not only considerthe environmental impacts of our manufacturing operations but also those associated with the other steps in thevalue chain. We therefore apply a life cycle approach, systematically assessing our product categories from farmto fork and beyond. We have been conducting Life Cycle Assessments (LCAs) to determine the environmentalimpacts of our major product categories including their packaging. This process, which considers production ofagricultural raw materials, animal husbandry, processing, packaging, transportation, distribution, consumptionand end-of-life, enables us to identify the risks and opportunities beyond our factories, and to work with ourstakeholders to define and implement improvements. For example, the LCA of Nescafé Classic and a comparisonwith alternatives (drip filter and capsule espresso), as published in the Journal of Cleaner Production, found thatapproximately 50% of environmental impact occurs during the use phase. The study showed that overall, NescaféClassic uses less energy and has a lower environmental footprint than drip filter coffee or capsule espressocoffee, particularly during the cultivation, treatment and delivery stages as it requires less green coffee per cupthan for one cup of the two alternatives.

2.4.2 GHG Inventory - operational scope

Please indicate the scope of your company's GHG inventory (according to WBCSD/WRI Protocol or other):

✓ ✓ Direct GHG emissions (i.e. "scope 1" of WBCSD/WRI Protocol)

✓ GHG emissions from imports of electricity, heat or steam (i.e. "scope 2" WBCSD/WRI Protocol)

✓ Other indirect GHG emissions (i.e. "scope 3" of the WBCSD/WRI Protocol)

❍ No scope


❍ Not known

Comment :Scope 1 and 2 emissions have been already published. Our efforts have helped to reduce direct greenhousegas emissions by 3.1% to 3.98 million of CO2-eq or 96.6 kg of CO2-eq per tonne of product, which representsa 48% reduction per tonne of product over the last ten years. Our indirect CO2 emissions from purchasedenergy remained stable at 3 million tonnes compared to 2008. Scope 3: Transportation & distribution of soldproducts: 2160000 metric tonnes of CO2-e Methodology: The total distance driven by trucks for distribution wascalculated based on the overall tonnage of products distributed to customers, an average load of trucks, anestimated average distance for complete distribution and an estimate for empty running of the trucks. A truckuses in average 35 litres of diesel per 100 km, resulting into a total fuel consumption of 920 mio litres of diesel.Using an emission factor of 2.63 kg CO2 / liter of diesel, this generates a total of 2.416 mio tonnes of CO2.



These figures were cross-checked with two other top-down approaches: analysisng the distribution costs leadto an estimated fuel consumption of 966 mio litres of diesel and 2.54 mio tonnes of CO2 (5% more than firstcalculation). Calculating the CO2-emissions based shipped tonne.kms and average CO2-emission of 72 g CO2/tonne.km gives an estimate of total 2.36 mio tonnes of CO2-emissions (2% smaller than first calculation). Nestléestimates that about 10% of its transports are done with trucks owned by Nestlé, leading to the rounded estimatesof 300 mio km driven by its fleet, generating about 250000 tonnes of CO2. The major part of transport (90% ofits transports) are however done by external carriers. Through supplier rationalisation, new tender policies anddriver training, our "green fleet" project -awarded second prize in the International Green Fleet Award 2009- hasreduced CO2 emissions across our European fleet of cars and commercial vehicles by 17% since 2007. Similarinitiatives, with local adaptations, are now being instigated in North America, Mexico, Brazil and Asia-Pacific. Tofurther reduce our impact on the environment, Nestlé Waters aims to use alternative transport modes whereverpossible. In France and Belgium, 50% of our bottles were distributed by train or "intermodal" transport (truck andtrain) in 2008, resulting in 60000 fewer truck loads, a saving of 12 million litres of fuel and lower transport-relatedgreenhouse gas emissions. Total products value chain: 48825651 metric tonnes of CO2-e Methodology: Basedon LCAs made on its different products categories, manufacturing operations represent between 10% and 20%of total GHG emissions along the entire product life cycle. On this basis Scope 3 emissions are estimated asrepresenting about 7 times scope 1 + scope 2 GHGs emissions.

2.4.3 GHG inventory - third-party verification

Please indicate which non-governmental, independent organization verifies your company's GHG inventory.✓ Verified by different organisations

❍ Not externally verified.


❍ Not known

Comment :Projects resulting in tradable emissions credits, eg. the conversion of our Nescafé and Milo factory in Graneros(Chile) to natural gas, are audited by thrid-party. The same applies to plants involved in EU Emissions TradingScheme which are periodically audited by a third-party. Bureau Veritas Solutions has been engaged to provideexternal assurance to the stakeholders of Nestlé SA (Nestlé) over the provision of information relating to itsCreating Shared Value (CSV) reporting and programmes in the "Creating Shared Value" section of Nestléwebsite. Building on previous years, the assurance process was designed to understand how Nestlé identifiesits material risks and emerging issues in a continually changing environment, and to challenge Nestlé’s inits CSV implementation, performance and reporting. The process has involved interviews and follow-upcommunication with 48 key management staff predominantly at Nestlé’s Head Office in Switzerland, visits(by Bureau Veritas’ global auditor network) to nine operational factories spanning eight countries, to evaluateSHE data management, reliability and accuracy and a visit to Nestlé Brazil to review the understanding andimplementation of CSV policies and related processes presented within the CSV section of the website at amarket level. The objectives were to: 1. provide reasonable assurance over the stated content within the CSVsection of its website for the reporting period including assurance against the report’s adherence to the GRIG3 Sustainability Reporting Guidelines and Nestlé’s stated GRI application level; and 2. provide an impartialcommentary on the implementation of CSV, its reporting process and associated systems and, where appropriate,propose recommendations for future development The scope of the assurance included: 1. a review of relevantCSV activities undertaken by Nestlé over the reporting period 1 January 2009 to 31 December 2009; 2. areview of information relating to Nestlé’s CSV issues, implementation, responses, performance data, casestudies and underlying systems to manage relevant information and data; and 3. an evaluation of Safety,Health and Environmental (SHE) data and systems across a sample of global operational sites. The Nestlé



Environmental Management System has been implemented throughout the Company since 1996, helping usto achieve continuous performance improvement and contribute towards sustainable development. We havemade major progress towards our goal of certifying our operations to the internationally recognised standards forenvironmental management (ISO 14001). By end May 2010, 398 certificates has been issued; this helps driveour performance and demonstrate compliance. Our aim is to certify all our factories to by year-end 2010. Thiscertification is done by a third-party.

2.4.4 GHG emissions target

What is your company's target for reducing GHG emissions and how will this target be achieved (inc. sources ofemissions covered, baseline, timescale)? What is your progress against this target?✓ Intensity target: 6.5% reduction from base year Base year: 2009 Target year: 2015 Nestlé has established a

specific target on GHG: Continue de-coupling of energy generation and CO2 emissions; ie greenhouse gasemissions at least -6.5% by 2015 Reduction of GHG emissions are driven by: - Energy and GHG emissionsreduction targets set at global and local levels - Implementing energy and GHG emissions reduction projectsworldwide - Local initiated Clean Development Mechanisms projects, icluding fuel conversion (eg. conversionfrom coal to natural gas at our Graneros factory in Chile) - New co-generation plants (eg. at our Himeji factoryin Japan) - Industrial ecology projects (eg. purchase of by-product energy from neighbour industrial companyat our Singen factory in Germany to 11000 tonnes CO2 reduction) - Focused GHG reduction projects infactories qualified for the EU Emissions Trading Scheme See specific projects in the comments section below.

❍ No target.


❍ Not known

Comment :Other targets: - 5% reduction of energy consumption per tonne of product by 2015: additional measures will helpNestlé to achieve at least a further 5% improvement in energy efficiency in each of its key product categoriesby 2015 - 1% reduction of energy consumption per tonne of product from base year. Base year: 2008. Nestléoverachieved its target on energy consumption per tonne of product in 2009 (Achieved: reduction of 2.3%)Reduction of GHG emissions are driven by: - Energy and GHG emissions reduction targets set at global andlocal levels - Implementing energy and GHG emissions reduction projects worldwide - Local initiated CleanDevelopment Mechanisms projects, icluding fuel conversion (eg. conversion from coal to natural gas at ourGraneros factory in Chile) - New co-generation plants (eg. at our Himeji factory in Japan) - Industrial ecologyprojects (eg. purchase of by-product energy from neighbour industrial company at our Singen factory in Germanyto 11000 tonnes CO2 reduction) - Focused GHG reduction projects in factories qualified for the EU EmissionsTrading Scheme Nestlé is implementing energy and GHG saving projects worldwide. Some of them are: -Implementation of 6 projects identified during Energy Target Setting done in 2009. (Final Cooler Heat Recovery,Recycling of cooling tower blowdown, Improvement of Power Factor, Steam flash recovery in decaffeinated plant,Steam line insulation, Steam trap maintenance) Toluca factory - Mexico. Investment: 15000000 MXN ($). Annualenergy savings: 68000 GJ. Annual emission reduction in metric tonnes CO2-e: 4800. Implementation is on-going.Savings are annual figures. - Replace all of the 320W & 400W lights by more efficient 220W T5 lighting system.Danville Buitoni factory - USA. Investment: 229000 USD($). Annual energy savings: 5400 GJ. Annual emissionreduction in metric tonnes CO2-e: 900. Implementation is on-going. Savings are annual figures. - Install a spentcoffee ground boiler to produce steam from waste biomass. Toluca factory - Mexico. Investment: 13000000 CHF.Annual energy savings: 600000 GJ. Annual emission reduction in metric tonnes CO2-e: 33700. Implementationis on-going. Savings are annual figures. - Install Variable drives on chillers and compressed air systems. Install aeconomizer on steam boiler. Chembong factory- Malaysia. Investment: 1100000 MYR. Annual energy savings:12000 GJ. Annual emission reduction in metric tonnes CO2-e: 1200. Implementation is on-going. Savings are



annual figures. - Instal a condenser for latent heat recovery in the flue gas of steam boilers. Biessenhofen factory- Germany. Investment: 380000 EUR(€). Annual energy savings: 14500 GJ. Annual emission reduction in metrictonnes CO2-e: 900. Implementation is on-going. Savings are annual figures. In 2009, Nestlé has launched theEnergy Target Setting Initiative. Teams of internal and external experts are sent to factories to identify energy/water and CO2 savings opportunities in the most energy-intensive manufacturing sites. Energy savings identifiedin 2009 amount to 1,000,000 GJ/year, corresponding to 74'000 t of CO2 emission avoidance. The implementationof these projects is ongoing. This initiative will be rolled out more widely in 2010 and the following years.

2.4.5 Carbon strategy

Please indicate what your company's strategy for reducing/managing carbon risk is based on.✓ ✓ Based on intra-company emissions trading.

✓ Based on national/international emissions trading.

✓ Based on carbon sequestration projects.

✓ Based on Clean Development Mechanisms (CDM).

✓ Based on Joint Implementation (JI) projects.

✓ Based on switching fuel sources.

✓ Based on reducing carbon intensive operations / technologies / products / services.

✓ Other methods, please specify: Energy savings Co-generation plants when relevant Industrial ecologyprojects Energy management software Renewable energy sources (solar energy, biomass energy,geothermal energy, photovoltaic energy)

❍ No carbon risk strategy.


❍ Not known

Comment :Climate Change is an integral part of Environmental Sustainability which support Nestlé Creating Shared Value,its fundamental business principle. This drives the environmental targets worldwide. In 2009 Nestlé started anupdated comprehensive Climate Change Diagnostic with the support of SustainAbility consultants and involvingrepresentative Business Units. The objectives: * To provide an initial stress-test of the Nestlé value chain againstdifferent climate change outcomes eg. identifying business risks and opportunities and * To help prioritize materialareas where Nestlé might consider developing specific strategic responses. The Climate Change Diagnosticshows that the Company has specific risks but also opportunities. Some identified risks: - Yield declines ofcommodities in low-latitude regions will increase commodity prices. - Cost inflation from rising energy prices andoil volatility. - Disruptions to coffee and cocoa yields will not only impact prices, but quality is likely to changeeven with minimal warming. This could impact core Nestlé brands. - Producers may adapt by producing cropsfor domestic or local production, reducing agricultural supply for export. - Agricultural labour supply could bedisrupted by extreme weather events and climate change-related migration. - Policy responses to climate change(e.g. carbon tax, cap-and-trade) may increase logistics costs. - Carbon taxation could heighten tariffs on importedgoods. - A global cap-and-trade system (or a combination of regulatory regimes) would put a higher price oncarbon, penalizing companies that have failed to reduce their operational footprint. - Retail chains may requiremore integrated environmental reporting on products. Some actions Nestlé has taken or plan to take to minimizethe risks are: Cap and trade scheme: So far Nestlé has analyzed the biggest impact during Phase III of EU-ETS,



which might come from the 5 coffee factories which will participate in this Phase. Nestlé's efforts will be focusedin further minimizing emissions in these factories through projects to reducing energy use and possibly usingsustainably-managed renewable fuels. Other potential cap and trade schemes are closely analysed to minimizetheir impact on Nestlé business worldwide. In order to assure the continuous supply of its main commodities,one of the initiative Nestlé has in place is working with suppliers, providing training and technical assistance, forexample, Nestlé and the International Finance Corporation each committed US$250 000 a year for three yearsto a project coordinated by ECOM and supported by the Rainforest Alliance to strengthen the supply chain forsustainable coffee in Central America. Some identified opportunities: - Opportunity to engage employees, helpingthem to deliver low carbon performance by identifying and implementing low carbon solutions across all businessareas. - Sourcing should shift – where possible – to take advantage of higher yields in mid-to-high altitude regions.- Optimize the opportunities in extreme weather areas. eg. In 2009 the R&D Abidjan in Côte d’Ivoire was openedand its focus is on agriculture, raw materials and traditional African ingredients. It helps to improve the cocoa inextreme weather conditions. This R&D, where more than 40% of the world’s cocoa originates, will provide farmerswith 1 million high-potential cocoa trees each year from 2012. - Reducing dependence of agricultural supply on oilcould help strengthen relationships with producers by making farmers less vulnerable. Nestlé invested over CHF220 million in environmental sustainability programmes and initiatives during 2009. Half of this amount applies toprojects directly related to Climate Change. Please see specific projects in section 2.4. GHG emissions target.

2.5 Genetically Modified Organisms

2.5.1 GMO Policy

Does your company have a publicly available GMO policy?

✓ Yes, please attach supporting documents or indicate website:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❍ Not publicly available.


❍ Not known

Comment :Nestlé does not produce genetically modified organisms (GMOs) nevertheless; Nestlé's global policy on GeneTechnology is available at the following link: Nestlé and Gene Technology As stated in the policy, Nestlé respectslocal needs, cultural differences and consumer attitudes concerning the use of ingredients derived from GMOs.Therefore, in response to European consumer preferences, our ingredients in Europe are non-GMO. Nestlé'sEuropean position is publicly available at this link: Nestlé position on European GMO legislation As explainedin the position, in response to the European legislation, a traceability and quality system is implemented whennon-GMO ingredients are used. This system named Identity Preservation (IP) ensures that a particular ingredientcharacteristic such as conventional, non-GM crop, origin is monitored and preserved throughout the supply chain.Nestlé's ingredients used in Europe are certified as non-GMO IP. The European market represents 39% of thegroup's Food & Beverages sales and in many countries outside Europe, Nestlé is selling non-GMO derivedingredients as well, as defined by local regulations. Moreover, Nestlé is increasingly offering products in theorganic market. Nestlé is selling a variety of organic baby foods in Germany, Nordic countries, Austria and



Switzerland. More recently, with the acquisition of Gerber, Nestlé is also offering a line of organic products in theUSA in addition to organic products offered by Uncle Tobys in Australia.

2.5.2 GMO Labeling

Does your company have a labeling policy concerning the GMO content of its products where not required bylocal legislation?✓ Yes, please attach supporting documents or indicate website:

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _❍ Yes, no reference indicated

❍ No, the company do not have a labeling policy concerning the GMO content of its products.


❍ Not known

Comment :As stated in our global policy Nestlé and Gene Technology Nestlé strictly adheres to national laws concerningthe labelling of GMO derived ingredients in food or pet food products. As explained in our European positionNestlé position on European GMO legislation the EU regulation did not affect the labelling of our products sincein response to European consumer preference our ingredients in Europe are non-GMO. According to the latestsurvey by the European commission (Eurobarometer, March, 2008), fewer Europeans (20%) are concernedby GMOs and among top 15 issues of concern; GMO is ranked 11 showing a relatively low level of concern.This might be in part the result of the enforced European GMO regulation. As a consumer oriented company weencourage authorities around the world to continue managing GMOs, including creating tailor made regulations, ina way that put consumers at ease with regard to the safety and use of GMO derived ingredients. We are confidentto maintain our competitive advantage also in complex regulatory environments, to keep serving our consumers.Nestlé chose not to have an additional labelling policy, which differs from what is required by national regulations,in order to avoid confusing consumers with labelling standards varying from company to company in the samecountry. Rather, in some countries like India, we use non-GMO ingredients even though there are no GMOlabeling requirements. In others, as stated before, we increase offering in the organic market. Nestle is selling aline of organic Gerber products in the USA, in addition to organic products offered by Uncle Tobys in Australia andorganic baby foods in Germany, Nordic countries, Austria and Switzerland.

2.5.3 MSA: GMO

In this section we include a performance score on the Corporate Sustainability Monitoring with the objectiveto verify the company's involvement and management of crisis situations that can have a damaging effect onreputation. The evaluation will be filled in by the responsible analyst of your industry. No additional information isrequired from your company. Please disregard the comment box. _ _ _ _ _ _ _ _ _ _Comment :



_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

2.6 Packaging

2.6.1 Integration of environmental aspects into the packaging policy

Does your company's packaging policy integrate environmental aspects? Please attach your policy and/or addreferences.✓ Yes, packaging policy integrates environmental aspects

❍ No, packaging policy does not include environmental aspects. But we systematically consider environmentalaspects in the packaging development. Please provide examples: _ _ _ _ _ _ _ _ _ _

❍ No packaging policy available


❍ Not known

Comment :Nestlé’s Packaging Policy integrated environmental aspects as far back as 1991 and forms part of the NestléPolicy on Environmental Sustainability. This Policy was updated in 1999 and in 2008, but the fundamentalprinciples from 1991 are still valid and form the foundation of our packaging development. The Policy statesthat we apply a holistic life cycle approach involving our partners from farm to consumer in order to reducethe environmental impact of our products and activities. The way we achieve this is to: - reduce the weightand volume of materials - lead in the development and use of materials from sustainably-managed renewableresources - support initiatives to recycle of recover energy from used packaging - use recycled materials -systematically use Eco-Design both in optimising packaging and in new developments The Environment Group atour Central Research facility in Lausanne, Switzerland has been reinforced with experts in Life Cycle Assessmentand Packaging Development. The main responsibility of this group is to develop guidelines and procedures, toperform training throughout the worldwide organisation, to advise on the choice and implementation of packagingwith lower environmental impact and to scout for new technologies and materials. A worldwide PackagingEnvironmental Sustainability Network was formed in 2008 to ensure that all businesses and geographical areasof our business have access to this specific expertise. During 2009 & 2010 the network has had regular networkmeetings both physical meetings, webinars and e-meetings. To complement the Nestlé Operations SustainabilityCouncil that is chaired by our Executive Vice President of Corporate Operations and the Creating Shared ValueAlignment Board chaired by our CEO Mr Bulcke; in early 2010 we formed an R&D Sustainability Council chairedby our CTO Professor Bauer. This Council ensures that sustainability is taken into consideration at the earlieststage of the development cycle and is fully integrated into our 5 Generation R&D pipelines with developmentplans up to 2014, or beyond. These pipelines are reviewed by Senior Management during the annual, or bi-annual, RandD Strategy Conferences for each business.



2.6.2 Packaging criteria

Please indicate what environmental aspects are systematically used in your policy and packagingdevelopment.Please attach documents and/or add references:

✓ ✓ Packaging reduction

✓ Recyclable packaging

✓ Recycled packaging

✓ Biodegradable / biobased packaging

✓ Take-back system

❍ No policy or packaging examples available


❍ Not known

Comment :Packaging reduction is one of the key elements of our Packaging Policy and Nestlé has been working for manyyears to reduce the weight and volume of packaging. The results are tracked every year by country and forglobally managed businesses. Since 1991 a total of 444’000 tonnes of packaging material have been saved. In2009 the savings of 59’000 tonnes were even higher than those achieved in 2008 of 58'000 tonnes (previousyears averaged 20’000 tonnes) This shows clearly the impact of the Packaging Policy and the measuresdescribed above. In the reference 1 some specific examples are given from 2009 - there are numerous otherexamples around the world. In order to maintain this momentum, a new process has been implemented thatexploits Nestlé’s worldwide IT data base – GLOBE. By accessing all the purchasing events through GLOBE,Pareto analyses can be done to identify the biggest opportunities for packaging reduction. Cross-business &cross-region teams are now focusing on 5 key projects that cover a total packaging spend of 400 million CHFwhile smaller projects are still being conducted in the individual markets. Recyclable packaging The use ofrecyclable packaging is systematically evaluated and pursued when there is a true environmental benefit. Thegood recyclability of PET is one of main reasons that PET is the material of choice not only for water packagingbut also for the launches of new Ready to Drink products in several countries like Brazil, Mexico & the USA. InArgentina bulk ice cream is now packaged in recyclable polypropylene (PP) including in-mould PP labelling.Recycled packaging. Nestlé uses significant quantities of recycled paper and board, glass and tin plate whereverthe safety and quality of the packed product is not jeopardised. New examples in 2009 include the introductionof recycled PET in the USA for water packaging under the brand Re-Source and in Switzerland for confectionarytrays for chocolate. Nestlé is also working towards establishing responsible recovery schemes for used packagingin markets where this does not exist. Biodegradable/biobased packaging Nestlé is at the forefront in the use ofbiobased packaging materials and has pioneered the commercial introduction of a number of materials. Biobasedmaterials are systematically evaluated in all new material developments and are used wherever it makesenvironmental sense. In addition specific new material development projects have been initiated with key supplierpartners and several new applications will be launched in 2010. Nestlé is a founding member of the new Chairof Bioplastics at the Ecole de Mines in Paris and a series of doctoral theses have started. Take back systemsare used extensively in transport packaging such as pallets and in 5 gallon water containers as well as for waterbottles in some countries but Life Cycle Assessment shows that they do not provide a true environmental benefitin the majority of primary packaging applications due to the environmental impact of transportation and cleaning.



2.6.3 Quantitative packaging targets

Does your company have quantitative packaging targets for the aforementioned criteria? Please attach supportingdocuments.

✓ Company has set a number of corporate-wide quantitative targets.

❍ Company has set one corporate-wide quantitative packaging target.

❍ Company has set quantitative packaging target(s) on a country/divisional level.

❍ Company is in the process of formulating quantitative packaging target(s).

❍ No quantitative packaging targets


❍ Not known

Comment :Zero Waste is a Corporate wide target that is a central part of our Nestlé Continuous Excellence initiative. Infactories throughout the world the DMAIC process (Define, Measure, Analyse, Improve, Control) is being rolledout. In packaging it is being used to reduce the waste of product and packaging materials in our factories. Forexample, DMAIC projects in 2009 led to 30% reduction in film losses in a pet food factory in France and 75%reduction in can losses in a beverage factory in Brazil. These loss reductions have a significant environmentalbenefit. Another Corporate wide target is to reduce the environmental impact of all new packaging by 15%. Thisis evaluated using the Eco Design tool PIQET (Packaging Impact Quick Evaluation Tool) that was developedover 3 years and was first introduced in 2008. This easy-to-use Life Cycle Assessment based tool enablescalculation of the environmental impact and allows the optimum choice of packaging material solution at anearly stage in the development process. PIQET compares directly different material options and calculatesthe impact in the following eight areas: water use, global warming, cumulative energy demand, minerals andfuel, photochemical oxidation, solid waste, eutrophication, and land use. The use of this comprehensive set ofenvironmental indicators is consistent with the requirements of the ISO Life Cycle Assessment standards andensures a holistic approach to true environmental impact reduction. Sustainability training including the use ofPIQET has been given in sessions around the world. By autumn 2010 over 200 people will been using the PIQETtool as part of their regular packaging work. This tool is now integrated in the Nestlé Project Management system(NPDI) process and is mandatory for all new product development throughout the company. Any new packagedevelopment that does not show an environmental benefit is escalated to the Packaging Manager and ultimatelyto the Head of the Business. A further development in 2009 is our firm commitment to ending the deforestationof rainforests. A partnership has been set up with the NGO TFT (The Forest Trust) and an action plan is beingdeveloped with priority in the areas of palm oil and pulp & paper for packaging.

2.7 Raw Material Sourcing

2.7.1 Guidelines or standards for agricultural raw material

Please indicate the environmental guidelines or standards your company has implemented for agricultural rawmaterial (for your own agricultural production, direct procurement and/or procurement over wider trade channels).✓ Please describe and attach relevant documentation: see comments




❍ Not known

Comment :Nestlé has two main sources of supply: 1. directly from 540'000 farmers (in the case of milk, coffee, fruits,vegetables and specific supply chains e.g. cereals in Africa or cocoa in Ivory Coast and Ghana) 2. indirectlythrough 165'000 suppliers (e.g. local manufacturers of semi processed materials, or trade companies for raw,packaging and services and indirect materials) This chapter is entirely dedicated to 1., supply directly fromfarmers. The 2. will be adressed in the questions 3.7. Nestlé highly promotes sustainable farming practicesand agricultural production systems that ensure long-term economic, environmental and social developments.Within its procurement strategy Nestlé applies direct procurement systems for fresh milk (40% of total freshmilk worldwide is bought at farm level, in more than 30 countries and from 315'775 farmers), coffee (10% oftotal green coffee worldwide is bought at farm level in 7 coffee producing countries from more than 100'000farmers), and cocoa (11 origins, 2 core countries Ghana and Ivory Coast). Figures certified by Bureau Veritas.Our sourcing approach first of all concentrates on raw materials quality and safety to ensure compliance withregulatory requirements. The materials have to be produced according to given standards and regulations thatare resumed into the newly published Nestlé Supplier Code. Nestlé applies following practices to ensure longterm supply of raw materials: Guidelines on Sourcing of Agricultural Raw Materials 1998 - Chapter on productionmethods, environment, pricing, etc. See attached document. The Nestlé Policy on Environmental Sustainability2008 - Chapter on Agricultural Raw Materials - confirms that Nestlé encourages sustainable farming methodsand, where appropriate, assists farmers in crop or milk production. The Nestlé Supplier Code - This is a codethat ensure that all Nestlé suppliers respect a number of minimum requirements such as prohibition of childlabor, adequate pesticide uses, upgraded water management techniques etc... this apply to all our farmers.To help suppliers to comply, Nestlé has elaborated and implemented Manuals describing what we consider asGood Agricultural Practices such as "Reducing Green house gas emissions from farms", "Spring CatchmentManual", "Water Assessment Manual Dairy Farm", "Post Harvest treatment of coffee Cherries", "Preference"Milk - Potatoes in France... Similar schemes have been produced locally in many other countries such as Brazil(avoiding mycotoxins in feed for animals), Argentina (cleaning in place methodology), Chile (awarding properwater harvesting technics), Greece, Italy (Drip irrigation, tomatoes), Spain etc... In countries such as China, India,Pakistan and Indonesia, Nestlé bases projects to improve sustainability of small-scale dairy farming systemson direct contacts with farmers and on farmers' trainings programs by joining efforts with NGOs or internationalorganizations (see UNDP & Nestlé Pakistan on web). To support the direct procurement of coffee (about 80'000tons per year) Nestlé has a network of coffee buying stations in 7 coffee producing countries. This system isusually combined with technical assistance programs (in China, Vietnam, Indonesia, Mexico, the Philippines, IvoryCoast and Thailand) and experimental and demonstration farms to enforce the training programs (they complywith SAI Platform principles. During these trainings focus is made on burning issue such as efficent use of waterin depulping systems. Another initiative in the coffee sector is the Nespresso AAA Sustainable Quality Program.The objective of this program is to improve the performance of coffee planters and of the whole supply chain byproviding assistance in coffee growing. The program is continiously scaled up. By 2013 80% of the coffee will besourced through the Nespresso AAA programs which are verified by Rainforest Alliance and Bureau Veritas.

2.7.2 Issues covered in environmental guidelines and standards

Please indicate what issues are covered by these guidelines or standards:✓ ✓ Reduced water consumption in agricultural production

✓ Protection of soil fertility

✓ Protection of biodiversity



✓ Restricted use of pesticides

✓ Organic production

✓ Transport distance for agricultural raw material

✓ Other, please indicate: see comments below


❍ Not known

Comment :All agricultrual raw materials directly sourced from farmers have to meet strict quality specifications whendelivered to the Nestlé factory gate. A wide range of physical, chemical and microbiological tests are conducted toensure the food safety and quality standards of Nestlé. For example in Pakistan, Nestlé is conducting 27 differentquality tests for fresh milk from the farm to the factory gate. Additional standards exist on farm management /economy - emissions (noise, odours, smoke, ...) and in particular GHG emissions - energy (transportation,biogas at farm level,...) - plant nutrients - water management (protection from pollution) - labour - community andwelfare - quality assurance All of these topics are covered in both the Nestlé Supplier Code, The Nestlé policyon environmental sustainability 2008 and the SAIN concept. Comment: In some cases, e.g. where specific foodproduct specifications require restricted use of pesticides, specific recommendations are provided especially forbaby foods and Nestlé Nutrition products (see also question 2.7.4 on organic supply).

2.7.3 Coverage of guidelines or standards for agricultural raw material

Please indicate the coverage of your agricultural raw material standards in the year 2009.

✓ 100 % of agricultural raw material costs for goods sourced according to these standards


❍ Not known

Comment :All the raw materials sourced by Nestlé have to meet very specific quality specifcations on phyisical, chemicaland microbiological requirements. All raw materials arriving at a Nestlé factory site are sampled and analyzedbased on a detailed quality monitoring system (NQMS - Nestlé Quality Monitoring System). Around 15% of all rawmaterials are sourced directly from the farmers. For all these raw materials sourcing specialist are in direct contactwith the suppliers or are managing collection centres or buying centres. There the elements of questions 2.7.2 aremonitored and managed. The other 85% of raw materials are purchased through suppliers, processors or traders.All these raw materials have to meet as well the Nestlé Quality Monitoring System. For more information on thedifferent elements, see question 2.7.1, 2.7.2 and also 3.7 on Standards for Suppliers.

2.7.4 Share of organic products

Please indicate the share of food and beverage revenues from certified organic products as a percentage of totalrevenues in the year 2009.



❍ _ _ _ _ _ _ _ _ _ _ % of total revenues

✓ Yes, products available but no share figure available


❍ Not known

Comment :Sourcing of raw materials from certified organic products depends strongly on product categories, geographicallocation, brand strategy, consumer preferences, etc.The highest level of organic raw materials are used in NestléNutrition products in Germany and other European countries. For some Nestlé Nutrition products in Germanyfor example 100% organic certified raw materials are used. Also many suppliers in developing countires arepractising farming without the use of chemical fertilizers or pesticides, but in most cases they are not certified.

2.7.5 Exposure to fisheries

Please indicate the share of fish and seafood products or products containing fish or seafood as a percentage oftotal food revenues in the year 2009.

✓ 1 % of total food revenues


❍ Not known

Comment :Nesté is purchasing fish and sea food products worth around 300 mio CHF, which is around 1.5% of total rawmaterial cost. Out of this, around 65% (200 mio CHF or 1%) are fish and sea food products, the rest are fish andsee food by-products (for the pet food business) of around 100 mio CHF, this correspond to around 0.5% of totalraw material cost. Combined this is around 1.5% of total raw material cost, which coresponds to around the same% of total revenues for the year.

2.7.6 MSC certification

What is the share of your company's MSC certified fish and seafood as a percentage of total fish and seafoodrevenues in the year 2009?❍ _ _ _ _ _ _ _ _ _ _ % of total fish and seafood revenues

✓ Not applicable. Please provide explanations in the comment box below.

❍ Not known

Comment :The main user of fish and seafood is the Nestlé Food Serivce Business Davigel in France.. Davigel has engagedsince a long time with responsible sourcing of fish and other raw materials. For example Davigel is sourcingonly "Dolphine Safe" Tuna fish. See link below for more information. http://www.davigel.fr/france/fr/Expertises/



Developpement-durable-un-fournisseur-responsable/Pages/Ameliorer-la-gestion-et-eviter-la-surexploitation-des-ressources-naturelles.aspx The sourcing of fish and sea food by products for the pet food business is contributingto a reduction of waste in the fish industry.

2.8 Water Related Risks

2.8.1 Exposure by water stressed areas

When considering physical water scarcity issues at a local level, please indicate what percentage of yourcompany’s production plants / sites are located in water-stressed area and what percentage of gross profits thesecontribute to in the last fiscal year. If you use different definition of "water stress" , please specify the alternativedefinition below. Please also indicate whether the water stress analysis for current operations include socialsensitivty analysis. NB: This question will not be assessed in isolation, but in combination with other questions inWater-related Risks.

✓ ✓ in water-stressed areas(<1700 m3/(person*year))

% of production plants in last FY: 46

% of gross profits in last FY: 46

Alternative definition: Water stress (<1700 m3/(person*year) evaluated atwatershed level based on World Resources Instituteprojection 2025 (from Global Water Tool WBCSD).

❏ Included social sensitivity analysis

✓ Amongst the production plants / sites currently located in water-stressed areas, please indicate yourcompany’s top fresh water consumers (in this case, fresh water consumption = fresh water withdrawn(surface water + ground water + municipal supply) minus water discharged and returned to its source atsimilar or higher quality than it has been withdrawn) in last FY:

Plant Name Location(area, country)

Water Use(m3/y)

Water intensity (m3/gross profit USD)(see info box)

Plant / Site #1 Vosges France 2610621 1.66

Plant / Site #2 Sheikupura Pakistan 1463455 3.21

Plant / Site #3 Springville USA 1191757 6.41

❍ According to our assessment and the above definition of water-stressed area, we currently have noproductions plants / sites located in water-stressed areas.




❍ Not Known

Comment :- Global Water Tool elaboration is based on physical water availability and does not incorporate any socialsensitivity evaluation. - % of gross profits in last FY: EBIT (Group) Earnings Before Interest, Taxes, restructuringand impairments, assuming proportional distribution among factories. - Water intensity (m3/per tonne of product):We report m3/tonne of product since m3/gross profit USD is affected by currency exchange rate fluctuation andtherefore does not properly reflect water management performance. - Water Use (m3/y): We enter fresh waterconsumption according to your definition (fresh water consumption = fresh water withdrawn (surface water +ground water + municipal supply) minus water discharged and returned to its source at similar or higher qualitythan it has been withdrawn).

2.8.2 Water quality by production plants

Please indicate your company’s 3 most sensitive production plants / sites in terms of water quality (i.e. wherewater intake treatment and/or water discharge treatment is critical) and the respective key water qualityparameters used (e.g TSS, TOC, TKN)

✓ Plant Name Location(area,country)

IntakePlease tick andindicate main waterquality parameter

DischargePlease tick andindicate main waterquality parameter

Plant #1 Chachoengsao Thailand ✓

TSS, Microbiology✓

Zero DischargeRequirement

Plant #2 Dieppe France ❏

_ _ _ _ _ _ _ _ __

✓

COD

Plant #3 Clayville South Africa ❏

_ _ _ _ _ _ _ _ __

✓

COD

❍ According to our assessment, we currently have no production plants / sites which are sensitive with regard towater quality (neither on water intake nor water discharge)

❍ Not applicable. Please provide explanations in the comment box below

❍ Not Known

Comment :Because good water quality in the areas surrounding our plants has direct benefits for our business, societyand the environment all our water is treated in wastewater treatment plants. Our preference is to use municipalwastewater plants to ensure we return only cleaned water back into the environment, but where these areinsufficient, we invest in our own on-site facilities (approximately 292 to date, including our latest in Tema,Ghana). We remove 97% of the organic load of the water leaving our factories before it is returned to the



environment. In 2009, we discharged 91.34 million m3 of water , a decrease of more than 5% on 2008, withan average level of organic load of 91 mg COD/l (Chemical Oxygen Demand per litre). During 2009, we havereviewed this KPI and have determined that figures for previous years were underreported. Our Chachoengsaofactory in Thailand, for example, was designed around a minimum water withdrawal and near zero dischargeconcept. This limits the discharge of cleaned wastewater to a small amount of saline water into the ocean (around40m3 a month with approximately 20% salt content), and the remaining water is treated before being used toirrigate our own land.

2.8.3 Tools / Processes / Systems / Standards / Frameworks used

Which tool(s) / process(es) / management system(s) / standard(s) / framework(s) does your company use toachieve the following objectives:

✓ Objective Name of tools / management systems / standards /frameworks

✓ Report and aggregation at corporate level: Internal tool (NEST: Nestlé Environment & SafetyPerformance Tracking Tool).

✓ Manage water risk in the supply chain: - Supplier Code. - Responsible sourcing audits.

✓ Track and calculate plant / site water intensity: Internal tool (NEST: Nestlé Environment & SafetyPerformance Tracking Tool).

✓ Determine virtual water content of products: Life Cycle Assesment of our products includes theirwater footprint.

❏ Determine virtual water exchange mapping: _ _ _ _ _ _ _ _ _ _

✓ Systematically track and map plant water usage:(e.g. WBCSD Water Tool)

- Internal tool (NEST: Nestlé Environment & SafetyPerformance Tracking Tool). - Global Water Tool fromWBCSD. - ETH Zurich database.

✓ Define water stress: - Global Water Tool from WBCSD and - ETH Zurichdatabase.

✓ Map water stress: - Global Water Tool from WBCSD projection 2025.

✓ Project future water stress: - Global water Tool from WBCSD projection 2025.



✓ Provide external data verification: Bureau Veritas. Bureau Veritas Solutions has beenengaged to provide external assurance to thestakeholders of Nestlé SA (Nestlé) over the provisionof information relating to its Creating Shared Value(CSV) reporting and programmes in the "CreatingShared Value" section of Nestlé website. The processhas involved interviews and follow-up communicationwith 48 key management staff predominantly atNestlé’s Head Office in Switzerland, visits (by BureauVeritas’ global auditor network) to nine operationalfactories spanning eight countries, to evaluate SHEdata management, reliability and accuracy. Pleasesee the Bureau Veritas Independent AssuranceStatement in: http://www2.nestle.com/Common/NestleDocuments/Documents/Creating%20Shared%20Value/About_reporting/BV_statement.pdf

✓ Contribute to collaborative initiatives:(e.g. signatory of the CEO Water Mandate)

- Founding signatories of the UN Global CompactCEO Water Mandate. - Working group "Reportingand Communication" co-leader in the development ofISO Water Footprint standard. - Member of the WaterFootprint Network.

✓ Other objectives related to water risks, pleasedescribe:

Nestlé is a committed leader in the public policydebate on restoring the balance between waterwithdrawals and the availability of naturally renewedwater. In 2009, we led a joint project, which includedthe International Finance Corporation of the WorldBank Group and McKinsey, producing Charting OurWater Future: A new economic framework to decisionmaking in November 2009.

This cross-sector analysis measured actualabstraction for human use against existingaccessible, reliable and sustainable supplyin watersheds, leading to a comprehensiveunderstanding of water overuse at national and globallevels. The effectiveness and cost of various waysto reduce that overuse were then compared, so thatdecisions on water management can be integratedinto wider economic decisions. Nestlé will use thesefindings in our public policy dialogue, with the aimthat they have a major impact, both on national andregional water policies and on our own efforts.

❍ We do not use any particular tools / management systems / standards / frameworks to reach any of the aboveobjectives.

❍ We plan to start using some tools / management systems in 2010.


❍ Not Known.

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

2.8.4 Risk Management - Quantity & Quality



How does your company manage risks with regard to the available quantity and quality of water relevant for youroperations?

✓ At corporate level, we have the overview of the following measures (please tick only if the statement is validfor at least 60% of your production plants / sites located in water-stressed areas and provide supportingdocuments):✓ Corporate water management policy and plan in place.

✓ Systematic tracking and monitoring of availability at local level.

✓ Estimates of future changes in water availability on a local level.

✓ Scenario analysis with potential impact on operations

❍ We have already taken some measures but for less than 60% of our productions plants / sites in water-stressed areas

❍ We do not manage this at group level.


❍ Not known

Comment :- Nestlé Environmental Requirements are in place. - Guidelines for Sustainable Water Resources Managementare distributed to all technical directors, factory heads and Water Resources Community in Nestlé Watersfactories. This document is supported by the Water Resources Review program, an internal audit system that isconducted on a regular basis. - On the local level, a continuous water resource managing system is in place withdaily monitoring (quantity and quality) done by Water Resources Champions or Factory Environmental Officers ateach Nestlé factory. - A meeting with general management and water management is held on a quarterly basis toverify the available resources per factory versus Business Plan; an action plan is developed if a gap is identified.- Tools like our internal Water Stress Index and the Global Water Tool from WBCSD are used to rank the differentsites, develop action plans and to continuously improve water management. This is reviewed quarterly with thegeneral management.

2.8.5 Risk Management - Regulatory changes and pricing structure

How does your company manage water-related risks in terms of regulatory changes and potential changes inprice structure (e.g. water tariffs, withdrawal restrictions, discharge standards and discharge tariffs)?

✓ At the corporate level, we track and monitor the following (please tick only if the statement is valid for at least60% of your production plants / sites located in water-stressed areas and provide supporting documents):✓ Regulatory changes at the local level.

✓ Estimates of future potential regulatory changes on a local level.

✓ Scenario analysis with potential impact of regulatory or tariff changes on operations at local level.

❍ We have already taken some measures but for less than 60% of our production plants / sites in water-stressedareas.





❍ Not known

Comment :The Nestlé Regulatory Affairs team works with a network of regulatory contacts in the markets. These contactstrack regulatory changes and also estimate future potential regulatory changes on the local level. Any changesand potential impacts are shared with Regulatory Affairs at market (country) level. A regulatory database ismanaged where all relevant regulatory documents are gathered for each market. It is updated as the localsituation changes. Our Water Resources Review (WRR) programme focuses on five areas: water quantity; waterquality; regulatory compliance; site protection; and relationships with other stakeholders.

2.8.6 Risk Management - Stakeholder conflicts

How does your company manage stakeholder conflicts concerning water resources?

✓ Please tick only if the statement is valid for at least 60% of your production plants / sites located in water-stressed areas and provide supporting documents:✓ Systematic tracking and monitoring of existing stakeholder conflicts.

✓ Estimates of future potential stakeholder conflicts.

✓ Scenario analysis with potential impact of stakeholder conflicts on operations.

✓ Active engagement with key stakeholders (local communities, NGOs, government bodies, large waterusers, etc.).

✓ Participation in integrated watershed management initiative in locations with key operations

❍ We have already taken some measures but for less than 60% of our production plants / sites in water-stressedareas.



❍ Not known

Comment :About 70% of the world’s available freshwater is withdrawn for agriculture, and an average of 3000 litres isneeded to produce one kilogramme of agricultural raw material, compared to less than 4 litres per kilogrammeof finished goods for processing those materials into food and beverage products. Good water managementis therefore fundamental to the livelihoods of the 2.6 million farmers who supply us both directly and indirectlythrough traders; it is also vital to us as a food company, for producing high-quality raw materials and in foodprocessing, and also for the cooking and preparation of many food products by consumers. Beyond strictmonitoring and compliance, we engage in specific water preservation activities with local stakeholders,depending on the local situation and needs. In Nestlé Waters Henniez, Switzerland, for example, water has beenused sustainably for bottling since 1905 and for 15 years work has been done with local stakeholders on theimplementation of land use practices that respect the environment and local water resources. Water used forbottling operations is collected only from existing springs, where hydrogeological modelling and water resources



monitoring are used to track groundwater stability. This is already implemented across three-quarters of therecharge area.

2.8.7 Suppliers exposure to water risks

Does your company know how exposed your critical tier 1 suppliers are to water-related risks? If so, pleaseindicate how your supply chain exposure was determined.

✓ Yes, please comment:For key commodities representing 90% of our raw material spend, we have started in 2008 analysing mainsupplier’s site locations (delivering Nestlé) in order to preliminary assess their water risk exposure. This wasdone in cooperation with the International Water Management Institute (Based in Sri Lanka) and the WordBusiness Council for Sustainable Development (WBSCD). As an example for milk supply (50% of our globalspend being made through trade) we concluded that the main source of our milk derivatives are Australia andNew Zealand. While these regions are not considered as water stress areas we had to go deeper in usingthe Global Water Tool from WBSCD to go at local level to confirm the preliminary assessment. For directprocurement of milk (the second half of our total spend) we are actually identifying our Nestlé sites via GPSlocations in order to strongly assess the milk district around by using local data.

❍ We plan to start in 2010


❍ Not Known

Comment :Final information packages are not yet public but Commercial Contract with the IWMI can be given upon request.

2.8.8 Suppliers water risks management

Do you collaborate with critical tier 1 suppliers located in water-stressed areas to minimize the following types ofrisks? If so, please indicate what measures are being taken.

✓ Measures



✓ Risks related to the quantity and quality of water Since 2009 we started to make responsible sourcingaudits of our key suppliers (see Supplier’s standardschapter). Environment and water management areindeed entire part of the audit made at site level.Based on the gap analysis and, in certain case(India, China, Brazil) the outputs of the WBSCDWater Risk tool, Nestlé purchasing have the full handbook to work together with suppliers to: Either closegaps to local environmental regulations (regardingwater management, site recycling plant etc) Orimprove situation by disseminating best practicesfrom other industry piers. A good example of whathas been done on the ground can be found into theNestlé Creating Shared Value Report under SupplierDevelopment in India.

✓ Risks related to regulatory changes or changes inpricing structures

Since 2009 we started to make responsible sourcingaudits of our key suppliers (see Supplier’s standardschapter). Environment and water management areindeed entire part of the audit made at site level.Based on the gap analysis and, in certain case(India, China, Brazil) the outputs of the WBSCDWater Risk tool, Nestlé purchasing have the full handbook to work together with suppliers to: Either closegaps to local environmental regulations (regardingwater management, site recycling plant etc) Orimprove situation by disseminating best practicesfrom other industry piers. A good example of whathas been done on the ground can be found into theNestlé Creating Shared Value Report under SupplierDevelopment in India.

✓ Risks related to stakeholder conflicts Since 2009 we started to make responsible sourcingaudits of our key suppliers (see Supplier’s standardschapter). Environment and water management areindeed entire part of the audit made at site level.Based on the gap analysis and, in certain case(India, China, Brazil) the outputs of the WBSCDWater Risk tool, Nestlé purchasing have the full handbook to work together with suppliers to: Either closegaps to local environmental regulations (regardingwater management, site recycling plant etc) Orimprove situation by disseminating best practicesfrom other industry piers. A good example of whathas been done on the ground can be found into theNestlé Creating Shared Value Report under SupplierDevelopment in India.

❍ We plan to start in 2010


❍ Not known

Comment :



Under the framework of the Sustainable Agriculture Initiative (SAI), a collaborative, food industry-led grouppromoting the development of sustainable agriculture worldwide, the members of its Water and AgricultureWorking Group, including Nestlé, are developing online resources through which to share best practice andhelping to develop the methodology for water footprinting in agriculture. These resources will be tested andrefined through several projects, including a six-month pilot project with the International Water ManagementInstitute (IWMI) to study the water footprint of milk and other local crops in Punjab, India. Largely due to localover-exploitation by agriculture, industry and domestic use, the local water table is dropping by up to a metrea year and could affect the supply of milk in our Moga milk district, from which we buy 1.25 million litres a dayfrom 100 000 farmers. Measures already in place include the recent Punjab Preservation of Subsoil Water Act,which promotes water conservation by delaying rice paddy transplantation, changing crop rotation patterns andencouraging less waterintensive crop species. Nestlé is currently working with the IWMI to identify key areaswhere local initiatives for better water management in agriculture could be developed.

2.8.9 Target and progress

For the top 3 water-consuming plants currently located in water-stressed areas, what water-related targets havebeen established at plant level and what measures are being taken to achieve these targets? Please see theinformation button for the definition of fresh water consumption.

✓ Unit of data Plant #1 Plant #2 Plant #3

Base line year Year (YYYY) 2006 2006 2006

Fresh waterconsumption ofbaseline line

m3 3434751 cubicmeters

1573237 cubicmeters

1318640 cubicmeters

Target year Year (YYYY) 2011 2011 2011

Reduction Target % of baseline value 12 12 12

Fresh waterconsumption in lastFY

m3 2610621 cubicmeters

1463455 cubicmeters

1191757 cubicmeters



Measures taken Strong focus inwater savinginitiatives, resultingin much higgerwater withdrawalreduction thantargets set.Additionally, alocal water riskassessment hasbeen performed(Water ResourcesReview) at thissite in order toevaluate thesustainability levelof water resourcesmanagement,including a macroanalysis of differentwater usages insidethe factory to identifywater savingsopportunities areas.

Strong focus inwater savinginitiatives, resultingin much higgerwater withdrawalreduction thantargets set.Additionally, alocal water riskassessment hasbeen performed(Water ResourcesReview) at thissite in order toevaluate thesustainability levelof water resourcesmanagement,including a macroanalysis of differentwater usages insidethe factory to identifywater savingsopportunities areas.

Strong focus inwater savinginitiatives, resultingin much higgerwater withdrawalreduction thantargets set.

Other target(s) _ _ _ _ _ _ _ _ __

_ _ _ _ _ _ _ _ __

_ _ _ _ _ _ _ _ __

❍ We plan to start in 2010.


❍ Not Known

Comment :Our goal is to reduce consumption on a comparable basis by a further 10–15% over the next five years and weplan to develop more sophisticated and localised metrics for this important area.

2.8.10 Water used during products' life cycle

Do you take water used during products’ life cycle and potential shift of customers away from water intensiveproducts into consideration when designing new products?

✓ ✓ We determine the virtual water content of each product.

✓ Our product declarations indicate our products’ virtual water content and are readily available to ourcustomers.

✓ We optimize the total quantity of water used through the utilization of each product over its lifespan and theimpact that the product utilization might have on water quality.



✓ We take potential shift of customers demand away from water intensive products into consideration.

✓ We consider the impact of product disposal on water quality.

❍ We plan to start in 2010.


❍ Not Known.

Comment :To optimise the environmental performance of our products, we not only consider the environmental impacts ofour manufacturing operations but also those associated with the other steps in the value chain. We thereforeapply a life cycle approach, systematically assessing our product categories from farm to fork and beyond. Wehave been conducting Life Cycle Assessments (LCAs) to determine the environmental impacts of our majorproduct categories including their packaging. This process, which considers production of agricultural rawmaterials, animal husbandry, processing, packaging, transportation, distribution, consumption and end-of-life,enables us to identify the risks and opportunities beyond our factories, and to work with our stakeholders to defineand implement improvements. For example, the LCA of Nescafé Classic and a comparison with alternatives (dripfilter and capsule espresso), as published in the Journal of Cleaner Production, found that approximately 50%of environmental impact occurs during the use phase. The study showed that overall, Nescafé Classic uses lessenergy and has a lower environmental footprint than drip filter coffee or capsule espresso coffee, particularlyduring the cultivation, treatment and delivery stages as it requires less green coffee per cup than for one cupof the two alternatives. The study resulted in four recommendations: • raise consumers’ awareness regardingways to improve efficiency during use, such as not boiling more water than is actually needed; • promote lower-impact green coffee production methods, such as limiting the use of fertilisers; • optimise energy consumptionwhen processing; • rethink packaging, eg by using lighter weight jars. For example, if consumers only boiled therequired amount of water for each of the 4100 cups of Nescafé consumed each second, this would save twice theenergy consumed by all Nescafé factories over the course of a year. Implementing these recommendations willhelp consumers to lower their own, individual “environmental footprints of eating (and drinking)”. Our ambition is tofurther assist consumers of our other products in reducing their own environmental footprints through continuingto quantify the environmental impacts of our products and identifying ways in which we, our broader supplychain and our consumers can contribute to reducing these impacts. We use the results of such LCAs internallyin our R&D processes, and share some of them with the scientific community to further improve reliability insustainability assessment methods.

3 Social Dimension

3.1 Social reporting

3.1.1 Quality of Social Reporting

In this section we evaluate the content, context and coverage of the social reporting included in other reports oron your website (e.g. own publication, part of a sustainability/CSR report or of annual report). The evaluation willbe filled in by the responsible analyst of your industry.Please proceed to the next question.

Comment :



Please see the 2009 Nestlé CSV Report, online version. http://www2.nestle.com/Common/NestleDocuments/Documents/Reports/CSV%20reports/Global%20report%202009/Global_report_2009_GB.pdf

3.1.2 Social Reporting - Assurance

3.1.3 Social Reporting - Coverage

3.1.4 Social Reporting - Qualitative Data

3.1.5 Social Reporting - Quantitative Data

3.2 Labor Practice Indicators

3.2.1 Labor KPIs

Please complete the table and indicate which of the following performance/management indicators your companyuses regarding the following labor relations related issues? Please provide figures covering the entire scope of thecompany and attach supporting documents.

✓ Issue Management / performance indicatorsNon-Discrimination / Diversity(ILO convention No.111)

✓ ✓ Female of total workforce (%):33

✓ Female in management positions (% of totalmanagement workforce):27

✓ Breakdown of workforce based on minority,culture or similar

✓ Other diversity indicator, pleasespecify: Employees split per geographicarea: Europe 33.9%, Americas 38.0%, Asia,Oceania, Africa 28.1%.

❍ No such indicators used



Equal Remuneration female/male(ILO convention No.100)

❍ ❏ Executive level:Average female salary:_ _ _ _ _ _ _ _ _ _Average male salary:_ _ _ _ _ _ _ _ _ _

❏ Management level:Average female salary:_ _ _ _ _ _ _ _ _ _Average male salary:_ _ _ _ _ _ _ _ _ _

❏ Non-management level:Average female salary:_ _ _ _ _ _ _ _ _ _Average male salary:_ _ _ _ _ _ _ _ _ _

❏ Please specify currency:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

✓ No such indicators used

Freedom of Association(ILO convention No. 87; No.98)

✓ ❏ Employees represented by an independenttrade union or covered by collective bargainingagreements (%):_ _ _ _ _ _ _ _ _ _

✓ Number of consultations, negotiations withtrade unions over organizational changes (e.g.restructuring, outsourcing):4

✓ Other indicators, please specify: Nestlé CAREProgram


Layoffs (based on ILO's A GuideTo WorkerDisplacement)

✓ ❏ Number of employees laid off in the last fiscalyear: _ _ _ _ _ _ _ _ _ _

✓ Number of consultations, negotiations withemployees over organizational changes (e.g.restructuring, outsourcing):4

✓ Other indicators, please specify: Ratio betweenN° of employees in 2008 and 2009: there is adecrease of 1.6%.




Health and Safety (based on ILO'scodes of practicesSafeWork)

✓ ✓ Tracking of safety performance

✓ Tracking of work-related fatalities

✓ Tracking of near misses or similar crisis events

✓ Other indicators, please specify: Permanentdisabilities, recordable injuries andoccupational illness.



❍ Not known

Comment :NON-DISCRIMINATION / DIVERSITY (ILO convention No. 111) - As a general rule, Nestlé adheres to a strictpolicy of non-discrimination based on gender, ethnic background, nationality, religion, and any other non-performance personal characteristics. A major business strength of the company is that people from over 100countries work together in one corporate culture, yet at the same time maintain their own national identity andculture. Nestlé has built its success and culture on this strong multicultural diversity. To leverage this criticalcompetitive advantage further, we have implemented a worldwide initiative to accelerate gender balance. Aseries of concrete measures facilitating more gender diversity at the top have been implemented. This has initiallyfocused on giving our leadership teams the necessary background and best practice guidance to increase genderbalance. Nestlé introduced a series of metrics (KPIs), that will be monitored on an annual basis, to keep track ofthe evolution on gender statistics in the areas of recruitment, developing and retaining at both global and locallevels. Some key human resources processes have also been reviewed. Locally adapted action plans are alsobeing deployed in all markets. BREAKDOWN OF WORKFORCE: Nestlé is present in 83 countries both emerging(WHO definition) and developed. However, no consolidated breakdown of workforce is performed given that insome counties is considered as private information. EQUAL REMUNERATION FEMALE/MALE (ILO conventionNo. 100) : - Although we have no consolidated information at global level, the Nestlé Remuneration Policyprovides that "Remuneration levels should properly reflect the skills and the efforts of an employee. Nestlé givesequal consideration to all employees, regardless of the level of their remuneration and without any discriminationwith respect to their gender, age, nationality or religion". Moreover, regular meetings are held at market levelbetween HR managers and employee representative to debate the question. FREEDOM OF ASSOCIATION (ILOconvention No. 87; No. 98) - Nestlé CARE Program rolled out in all our operations checks (through independantexternal auditors) that Freedom of Association is respected. Since 1996, Nestlé Management and the employeerepresentatives - recognising the value of exchange of information- established a "Nestlé European Councilfor Information and Consultation" (NECIC) based on an agreement in accordance with Directive 94/45/1994.This agreement provides a framework for the fair and frank exchange of timely and comprehensive information,dialogue and consultation between Management and employee representatives in EUR in order to improvemutual understanding and cooperation. 2 plenary meetings and 2 SC meetings are held twice a year. NUMBEROF EMPLOYEES LAID OFF in the last fiscal year: - This indicator is followed at Market level. HEALTH & SAFETY(based on ILO'scodes of practices SafeWork) : - We adhere completely to the international standard OHSAS18001, which encompasses the ILO codes of safe work. We have plans to certify all our factories against thisstandard within the next two years. Tracking of safety performance is done through intranet software (NEST),which tracks individual incidents in all Nestlé sites worldwide. The system is totally transparent for the SH&Ecommunity, i.e. Safety Managers worldwide can benchmark themselves vs. other sites within the Nestlé Group(including Joint Ventures with >=50% Nestlé control). Tracking of work-related fatalities is done throughthe same software, plus immediate direct communication to company's top management through an ad-hoc



procedure. Near misses are tracked locally in factories as well as all permanent disabilities, recordable injuries &the proportion of occupational illnesses in the total number of occupational injuries.

3.2.2 Grievance resolution

Please indicate which systems are in place to collect and handle employee grievances and complaints to ensurethat workers can raise their concerns in confidentiality.✓ ✓ Help line

✓ Whistleblowing policy

✓ Independent person or department in charge of solving complaints by employees such as diversitycommittee, company ombudsman, please indicate name: Hotlines in various countries as ICAS (externaloutsourced hotline) + Nestlé CARE Program + Human Resources, Legal and Compliance departments inall countries

✓ Counseling

✓ Strict confidentiality ensured. Please specify: Employees are ensured that any complaint is dealt withconfidentially and without any endangering of job safety

✓ Policies and related information widely circulated in appropriate languages

❍ No systems available


❍ Not known

Comment :Regarding complaints handling, the Code of Business Conducts states on page 8, section 14, that complaintsmay be made on a confidential basis or through EMPLOYEE HOTLINES. If it is appropriate, in view of the natureof the reported matter, reports of violations may be made directly to higher levels including the GROUP'S CHIEFEXECUTIVE OFFICER and/or CHIEF COMPLIANCE OFFICER. Regarding the question on confidentiality, Nestlébelieves in transparency, promotes an environment of open communication and condemns any form of retaliationagainst employees who make a report in good faith. Accordingly, employees are encouraged to bring complaintsto the attention of their line management, the HR, LEGAL or COMPLIANCE FUNCTION. All of the aforesaidare fully aware of the need to treat any such complaint with the highest possible level of CONFIDENTIALITY.Moreover, Nestlé recognizes that employees may in some instances feel uncomfortable to file complaints openly.The Company respects such need or perceived need for ANONIMITY and therefore provides employees with theopportunity to make complaints on a confidential basis or through employee hotlines. For investigation purposes,Nestlé will not distinguish between reports filed openly and those filed on a confidential basis. We have hotlinesin numerous Markets as well as Corporate hotlines for WHO Code violations and HR matters; We have anINTERNAL OMBUDSMAN system enabling employees to alert the company on potential non-compliance withthe WHO Code on the Marketing of Infant Formula in a confidential way (p. 9 our Nestlé Corporate BusinessPrinciples) Morevover, the Nestlé CARE PROGRAM, a group-wide audit initiative launched in 2005, aimsthrough independant external auditors at verifying that our operations comply with local legislation and withNestlé Corporate Business Principles in the areas of Health & Safety, Labor standards, Business integrity and



Environment. The Nestlé CARE Program comprises INDIVIDUAL CONFIDENTIAL INTERVIEWS that enable theexternal auditors to identify potential issues raised by the employees during those interviews.

3.2.3 Public commitment

Does your company publicly endorse (having signed or publicly acknowledging adherence to) one or more of thefollowing charters/frameworks?✓ ✓ UN Universal Declaration of Human Rights

✓ ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy

✓ OECD Guidelines for Multinational Enterprises

✓ Other national / international charters related to labor practices/basic rights issues (e.g. based on abovementioned guidelines), please specify and attach document: see comments

❍ No charter/s signed or publicly endorsed


❍ Not known

Comment :The Nestlé Corporate Business Principles endorse the 10 Principles of the United Nations Global Compact(UNGC), whose Human Rights and Labour Principles are based on the Universal Bill of Rights (UniversalDeclaration and the two Covenants), as well as on the fundamental ILO Conventions. Furthermore the CorporateBusiness Principles commit the company to the OECD Guidelines for Multinational Enterprises, the ICC BusinessCharter for Sustainable Development and specifically refer to the UN Convention of the Rights of the Child, theILO Convention 138 on the Minimum Age for Employment, the ILO Convention 182 on the Worst Forms of ChildLabour and to the World Health Organisation’s (WHO) International Code of Marketing of Breast-milk Substitutes.Nestlé also publicly supports the ILO Tripartite Declaration on Multinational Entreprises (see speech by ChairmanPeter Brabeck at the ILO for the 30th Anniversary of the Tripartite Declaration, 16 November 2007 (http://www.ilo.org/public/english/employment/multi/events/multiforum07/speeches/brabeck.pdf) The implementationof the Nestlé Corporate Business Principles is audited both internally and externally (through Nestlé CAREProgram). The essence of the Corporate Business Principles is also contained in the Nestlé Supplier Code.Evidently, Nestlé complies with national law and regulations in the countries, in which it operates. At present,Nestlé is conducting a comprehensive Human Rights Compliance Assessment (HRCA) with the Danish Institutefor Human Rights, in order to evaluate potential human rights risks in corporate policies or monitoring systems

3.2.4 MSA Labor Practices Indicators

In this section we include a performance score on the Corporate Sustainability Monitoring with the objectiveto verify the company's involvement and management of crisis situations that can have a damaging effect onreputation. The evaluation will be filled in by the responsible analyst of your industry. No additional information isrequired from your company. Please disregard the comment box. _ _ _ _ _ _ _ _ _ _Comment :



_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

3.3 Human Capital Development

3.3.1 Human resource skill mapping and developing process

Please indicate the level of implementation of your company's formalized skill mapping and developing process.Please indicate the coverage for each employee category and attach supporting documents.

✓ Yes implemented for:Employee Category Coverage in %Executive/Top management 100Middle/General management 100First line management/Supervisor 100Specialists groups 100

Other employees, please specify: _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _

70

❍ No formalized skill mapping and developing process implemented


❍ Not known

Comment :In 2010, a new Performance Evaluation and Progress Development Guide was launched globally for allemployees except those in hourly-paid jobs. All non-hourly paid employees are expected to participate in a formalprocess of Performance Evaluation and PROGRESS & DEVELOPMENT REVIEW which links achievementof objectives with an analysis of strengths and developments relative to functional skills requirements andbehavioural competencies which are described in the NESTLE LEADERSHIP FRAMEWORK document. Inaddition, career development aspirations are discussed and documented. These are completed by employeein discussion with their immediate manager between December and February. The average completion rate ofPDG (PROGRESS & DEVELOPMENT GUIDES) worldwide is around 80% (manual process in some marketsprevents a fully accurate measure). For Hourly paid employees, local practices vary depending on the stageof maturity of the site, normally a simplified version of the PDG. It is Nestlé's aspiration that all employeeshave development plans. As part of the annual TALENT DEVELOPMENT CYCLE, management teams atMarket, Regional and Corporate levels conduct talent reviews to agree on those with potential for further careerdevelopment opportunities and make succession plans. Some functions (eg: Finance and Supply Chain) provideintranet-based detailed COMPETENCY-DESCRIPTIONS for all key functional positions, recommended curriculaor other learning tools and career maps to show how to progress from one position to another, and recommended



ways to acquire the competencies. A key Corporate HR initiative is to complete this for all Functions by end of2010. This project is on track.

3.3.2 Human Capital performance indicators

Please indicate which performance indicators your company uses to measure the execution of your skill mappingand developing strategy. Please provide specific documents on performance indicators.

✓ ✓ Non-financial indicators/ratios (e.g. number of hours spent in trainings, company-specific skillscategorization), please specify:see comments

❏ Cost-based indicators/ratios (e.g. training cost per employee), please specify:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❏ Value-based human resource indicators (e.g. ROI - Return on investment per employee, EVA - Economicvalue added per employee), please specify:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

✓ Other HR performance indicators, p lease specify:Nestlé Leadership Framework 13 behaviors - Nestlé on the Move


❍ Not known

Comment :Nestlé have established 15 Strategic / Globally mandated HR KPis to arm managers with the informationneeded to focus efforts in the Human Resources areas that have an impact on the business. The StrategicKPis that relate to developing strategy are * % Key Positions Filled by Succession Plan * Quality of Selection* Development Plan Quality * High Performer Turnover * Leadership Effectiveness Index Percent * % FemaleManagers * Low Performer Improvement Rate. Nestlé also expect each HR Function to produce “People Plans.”People Plans are Business documents that align Business Tactical & Strategic Needs, People dimension riskmanagement, & insight from HR Indicators to provide direction for how the talent within the organization is bestmanaged and leveraged to drive business success.

3.3.3 Personal and organizational learning and development

Please indicate the tools and processes widely adopted by your company to manage organizational learning andknowledge management.✓ ✓ Formal knowledge/learning networks with regular meetings and staff support

✓ Intranet based Knowledge Repositories/Databases

✓ Intranet based interactive knowledge platforms integrated into daily work processes

✓ Peer group KPI comparisons across Business Units



✓ Systematically accessible process descriptions of best practice processes

✓ Company university or external comparable education facility

✓ Employee idea management system integrated

❍ No such tools and processes used


❍ Not known

Comment :Emerging Markets (EM) benefit as any other market from the WORLDWIDE KNOWLEDGE AND TRAININGNETWORK of Nestlé. At Corporate level, NESTEC (Worldwide HQ Technical Assistance to Nestlé OperatingCompanies in the countries) ensures the adequate knowledge transfer from HQ to the Markets. Nestec coversall functions & categories of our businesses: Marketing & Sales, Procurement, Supply Chain, Technical &Production, R&D, Finance & Control, Human Resources, IS/IT... More than 3000 people work for Nestec.All people around the world can access information and knowledge on NESTEC INTRANET and the variousREPOSITORIES. The IS/IT GLOBE project is now largely implemented across all Nestlé business operations andis based on 3 pillars: DATA STANDARDISATION; implementation of BEST PRACTICES; implementation of aSTANDARD INFORMATION SYSTEM (SAP). In April 2009, GLOBE implementation in EM was 95% of NPS (seedetailed calculation in reference). TRAINING & DEVELOPMENT actions are in place at various levels (Market,regional and global) to ensure that Nestlé people has the right understanding, skills, capabilities and behavioursto perform their jobs effectively and according to Nestlé standards. Nestlé Training & Development offeringcomprehends: - ON-THE JOB TRAINING, by far the fundamental element of training at Nestlé, ensuring handsonexperience in developing skills. This learning process is facilitated through: LINE MANAGERS as the firstemployee trainer. SUPER-USERS, subject matter experts dedicated (part or full time) to teach their colleagueson the use of best practices and SAP transactions related to employee’s working processes. MENTORS, informalapproach to learn from more experienced people within the same working site. - The TRAINING DEPARTMENTin every Market runs an annual training programme designed to close performance gaps that have been detectedthrough a training needs assessment based on the PERFORMANCE EVALUATION (PE) and PROGRESS &DEVELOPMENT GUIDE (PDG) processes (for more details on the PE & PDG processes, please see Q77 to79). - Through E-LEARNING PROGRAMMES, EM have access to the same learning curriculum and they arefollowing the same pattern of education as other countries. Among hundreds of general e-courses offered atglobal level on all functional areas available in 5 languages, there are 294 especially developed for Nestlé. -INTERNATIONAL WORKSHOPS are organized by Corporate Functions at Headquarters, aimed at consolidating/improving participants' knowledge and/or skills in an area of existing expertise. - In 2009, NESTLE "RIVE REINE"INTERNATIONAL TRAINING CENTER in Switzerland offered 95 programs (one or two weeks duration each)to which 2657 employees from all over the world attended. 44% of those participants came from EM. Out of the95 programs, 45 took place at Rive-Reine itself and 50 were decentralized in various Markets, 26 of which weredelivered in emerging markets, whereby several of their local managers also play the role of instructors/speakers,emulating the spirit of Rive-Reine courses where 75% of speakers are internal experts from Headquartersincluding all members of the Executive Board. - In 2009, 95 managers followed a PROGRAMME at IMD, ourpreferred business school in Switzerland. 33 of them came from EM. At local level, 23 markets (from which 10EM) use other business schools. In addition to our global technology platform and training programs, Nestlé usesINTERNATIONAL TRANSFERS AND PROJECTS extensively to exchange knowledge and skills. As noted inQ30, 39% of expatriates at the Centre HQ are from EM while 63% of expatriates from Switzerland are assignedto EM. In addition, we use SHORT TERM MISSION ASSIGNEMENTS of 6-12 months duration. Those missionsare currently essentially driven by the NCE ( Nestlé Continuous Excellence Program ) but not only. In 2009, 40%of these missions assignments in Vevey were from EM.



3.4 Talent Attraction & Retention

3.4.1 Coverage of employees through predefined performance appraisal process

Please indicate the percentage for each employee categorization, which are covered by a predefined andstandardized performance appraisal process.✓ Employee Category Coverage in %

Executive/Top management: 100Middle/General management: 100First line management/Supervisor: 100Specialist groups: 100


100

❍ No predefined and standardized performance appraisal process


❍ Not known

Comment :Please refer to Question N° 77. In addition, during 2010, a new PERFORMANCE EVALUATION PROCESS willbe deployed globally which is designed to help managers and employees to clarify objectives and performanceexpectations have ongoing review and coaching as needed complete an interim review after 6 months completea formal end of year evaluation of performance. Performance in this context is defined as WHAT (OBJECTIVES& JOB RESPONSIBILITIES) and HOW (with 4 GLOBALLY DEFINED BEHAVIOURS). This will enable allemployees to have feedback about their performance and where they can improve

3.4.2 Percentage of performance related compensation for each employee category

What is the share of performance-related compensation for each employee category as a percentage of totalcompensation (excluding pension plans and fringe benefits) that your company paid out in the last year?✓ Employee Category Percentage of total compensation

Executive/Top management: 65Middle/General management: 40First line management/Supervisor: 35Specialist groups: 15


6

❍ No performance related compensation




❍ Not known

Comment :Performance criteria can be individual or collective. Ratio depends on level of the position.

3.4.3 Balance of variable compensation based on corporate and individual performance

Please indicate for each employee category the percentage of variable compensation that is based on corporateand/or individual performance respectively. The sum of the percentages in each employee category (row) mustequal 100%.✓ Employee Category Share of variable compensation

based on corporate performance[%]

Share of variable compensationbased on individual performance[%]

Executive/Top Management 30 70Middle/General Management 30 70First Line management /Supervisors

30 70

Specialist Groups 100 0

Other employees, please specify: __ _ _ _ _ _ _ _ _ _ _ _ _ _

100 0



❍ Not known

Comment :The payout of variable compensation is determined on the achievement of a set of predefined objectives. Thesecan reflect corporate (collective) as well as individual performance. The weight of these two elements can varybetween different Nestlé units. The overall objective is to have a balance between corporate and individualobjectives. The split is determined by the level of the position in the organisation, the nature of the respectiveNestlé Unit (operating company, head office). The figures in the table above provide an example for the headoffice of the Group. In operating companies, the weight of the corporate objectives is generally higher than ina head office unit. For Executive Board Compensation please refer to the Corporate Governance Report 2009( page 29 & 33 )

3.4.4 Corporate Indicators for performance-related compensation

Please indicate your company's pre-defined corporate indicators relevant for the variable compensation ofExecutive / Top Management.✓ ✓ Internal Financial Success Metrics (e.g. cashflow, EBIT, Revenues).



❏ External Financial Success Metrics (e.g. Share price, Tobins Q).

✓ External Perception Metrics (e.g. reputational risks, customer satisfaction, feedback from stakeholderengagement).

✓ Environmental metrics (e.g. corporate Emission reduction).

✓ Social figures (e.g. corporate Health & Safety figure).

❍ No corporate indicators relevant for performance related compensation pre-defined.


❍ Not known

Comment :The variable compensation of Executive and Top Management at Nestlé is specific to the individual and tothe function. Nestlé uses a combination of different Metrics in the performance related compensation, this isprimarily Internal Financial Metrics ( examples: REAL INTERNAL GROWTH (RIG) , ORGANIC GROWTH,EBIT or WORKING CAPITAL EMPLOYMENT) but also includes External Perception Metrics ( examples:REPUTATIONAL RISKS, CUSTOMER SATISFACTION ); Environmental metrics (examples: WATERCONSUMPTION, GGH EMMISSIONS) and Social figures (examples: SAFETY & HEALTH FIGURES) ForExecutive Board Compensation criteria please refer to the Corporate Governance Report 2009 ( page 29 & 30 )For Top Management an extensive list of Compensation criteria can be found at the beginning of the 2009 CSVreport in the two pages performance summary

3.4.5 Type of individual performance appraisal

Please indicate the type and employee coverage of individual performance appraisals, which are used forindividual performance-related compensation.✓ ✓ Management by Objectives: Systematic use of agreed measurable targets by line superior 100 % of all

employees

✓ Multidimensional performance appraisal (e.g. 360 degree feedback) 100 % of all employees

✓ Formal comparative ranking of employees within one employee category 10 % of all employees


❍ Not known

Comment :All managers and employees who receive individual performance related compensation are covered by aperformance evaluation program. The objectives are stated at the beginning of the performance year, theachievement levels determined at the end. The achievement level of each objective (corporate and individual)determine the payout of the variable compensation For Executive Board Compensation please refer to theCorporate Governance Report 2009 ( page 29 & 33 )



3.4.6 Communication of individual performance to upper management

Is the individual performance of each employee (relevant for variable compensation) communicated to the nextupper management level?✓ Yes, regularly communicated. Please specify:

Performance Evaluation (PE) and Progress and Development Guides (PDG) are reviewed and signed by thenext level of management. In the new PE as from 2010, PE ratings will also be reviewed and calibrated bypeer level management to ensure good levels of consistency.

❍ Not communicated


❍ Not known

Comment :Performance Evaluation (PE) and Progress and Development Guides (PDG) are reviewed and signed by the nextlevel of management. PE ratings are also reviewed and calibrated by peer level management to ensure goodlevels of consistency.

3.4.7 Payout type of total performance-related compensation

Please indicate the type and its percentage share of total performance-related compensation (excluding pensionplans and fringe benefits) which your company paid out/granted for the last year. The sum of all types ofperformance-related pay equals 100%.✓ Payout Type Percentage (Sum must equal 100%)

Annual cash bonus 85Shares/share options immediately available or with alocking period of less than 4 years

15

Shares/share options with a locking period ofminimum 4 years

_ _ _ _ _ _ _ _ _ _

Other pay-out types immediately available or with alocking period of less than 4 years, please specify:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _

Other pay-out types with a locking period of minimum4 years, please specify:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _



❍ Not known

Comment :



The company puts considerable emphasis on variable compensation. It is a reflection of its COMMITMENT TOPERFORMANCE. The large portion of variable pay is made up of the Annual Cash Bonus. It is determined by acombination of corporate and individual objectives. A smaller portion of variable pay is delivered through Long-Term Incentive Plans. These are essentially retention plans for key management staff. Participation in such plansis limited to around 1% of the total Nestlé population The blocking period of LTI benefits is generally three years.For Executive Board Compensation please refer to the Corporate Governance Report 2009 ( page 29 to 33 )

3.4.8 Trend of employee satisfaction

Please indicate in the following table the satisfaction level of your employees based on your company's employeesatisfaction surveys.✓ Indicator 2006 2007 2008 2009 Trend

explanation

Employeesatisfaction,e.g. committed,motivated,satisfiedemployees(100% equalsmaximumsatisfactionlevel)

82 85 85 78 New Surveyprovider - seebelow

Percentageof employeescovered throughemployeesurveys

58 35 45 12 12% equatesto 34,077employeesparticipating inthe new Surveyin 2009

❍ No employee satisfaction trend analysis


❍ Not known

Comment :In 2009 Nestlé asked Hay to become their preferred Global External Employee Survey provider. In 2009, 34,077employees (12% of 283,000 employees) completed the Pilots and November 09 Survey Windows - NestléUSA, Canada, Brazil, USA Dreyers, Nestlé Central America, GLOBE Centre Americas, Greece, South Africa,Nespresso HQ in Switzerland. All other Nestlé Markets will survey in 2010. Total of 80 Questions to choose from.First 22 Questions are global and mandatory, and include Engagement, Enablement & Leadership sections. TheEngagement Section is our term for "Satisfaction" and the above % Favourable score above Hay's amalgamatedscore for the following questions - I am proud to work for my company / I feel motivated to go beyond my formaljob responsibilities / My company motivates me to contribute more than is required / I would recommend my



company to family or friends as a place to work / Given your choice, how long are you likely to work for thecompany?

3.4.9 MSA Talent Attraction & Retention


3.5 Corporate Citizenship and Philanthropy

3.5.1 Group-wide Strategy (consumers focus)

Does your company have a group-wide strategy that provides internal guidance to your corporate citizenship /philanthropic contributions? Please provide supporting documents and indicate which main business driversunderpin your company’s business case for engaging in corporate citizenship / philanthropy.

✓ Yes, please specify the name of the internal document and add a reference:Nestlé Creating Shared Value Report 2009✓ A significant proportion of our existing customers are located in emerging markets OR our growth strategy

focuses primarily on expanding in emerging markets

✓ Our products / services meet basic needs and stakeholders expect us to provide these to lower-incomecommunities

✓ It provides input into new business development / product adaptation and enables us to expand ouroffering to match the diversity of customers

✓ Our business activities represent a major source of local development and added value to the localeconomy

✓ Other:Case studies: Gender Balance Japan, Women's Dairy Development Programme, Healthy Kids GlobalProgramme,

❍ We do not have a group-wide strategy

❍ We plan to develop a group-wide strategy in 2010




❍ Not Known

Comment :Question Nr. 1. pages 30, 36, 45, 4 Question Nr. 2: pages 30, 36, 37 Question Nr. 3: pages 72 Question Nr. 4:pages 70, 72 At Head Office, Corporate donations make contributions totalling CHF 4 mio (1 mio food donations- 3 mio money donations) Nestlé Earthquake Relief Chili and Haiti, Croix Rouge - Secours Enfants, Aide Suisseaux Montagnards, Swisscontact, Fondation Theodora, Epiceries Caritas, Pro Senectute, Nestlé Art Foundation,Alimentarium (Nestlé Foundation - Museum Nutrition), Nestlé foundation (Agriculture)

3.5.2 Type of philanthropic activities

For the last fiscal year, please indicate on a consolidated group-wide basis what percentage of your corporatecitizenship / philanthropic contributions falls within each category. Please see the information button for definitionsand explanations on the categories.

✓ Category Percentage of Total Costs

Charitable Donations 50

Community Investments 50

Commercial Initiatives 0

Total must equal 100%

❍ We plan to start reporting our philanthropic activities according to these categories in 2010

❍ We do not report our philanthropic activities according to these categories


❍ Not Known

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

3.5.3 Input



For the last fiscal year, please estimate the total monetary value (at cost) of your company’s corporatecitizenship / philanthropic contributions for each of the following categories. Please note that marketing andadvertising budgets should be excluded from the calculation.✓ Please specify currency:

CHFType of Contribution Total amount (in local currency)

Cash contributions 90000000

Time: employee volunteering during paid workinghours

_ _ _ _ _ _ _ _ _ _

In-kind giving: product or services donations, projects/partnerships or similar

87000000

Management overheads _ _ _ _ _ _ _ _ _ _


❍ Not Known

Comment :Time : Employee volunteering and Management overheads are not calculated separately

3.5.4 Measuring Benefits

Does your company have a group-wide system in place to systematically measure the impact of your company’svoluntary contributions in order to assess whether you have met your objectives for your corporate citizenship /philanthropic activities? If so, please indicate which KPIs your company uses to measure the impact of yourcontributions (max. 5 KPIs in each category) and provide supporting documents.

✓ Business Benefits KPIs Social / Environmental ImpactsKPIs

KPI #1, please specify: CHF 107 618 million NestléNutrition Sales volumes, page 30of CSVR

165 553 Farmers trained throughcapacity-building programmes,CSVR 84/85/86

KPI #2, please specify: 7252 Products renovated fornutrition or health considerationsm,CSVR pages 33/34

77 % Direct procurement marketscovered by SAIN programmes,CSVR pages 25/28/70/72

KPI #3, please specify: _ _ _ _ _ _ _ _ _ _ 3950 Populary PositionedProducts, CSVR page 36

KPI #4, please specify: _ _ _ _ _ _ _ _ _ _ 10 SAIN projects associated withwater, CSVR page 70



KPI #5, please specify: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❍ We plan to develop KPI to measure the output of our corporate citizenship / philanthropic activities by the endof 2010

❍ We do not have a group-wide system in place to systematically measure the impact of the company’svoluntary contributions


❍ Not Known

Comment :_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

3.6 Occupational Health and Safety

3.6.1 Lost-time injuries frequency rate (LTIFR) Employees & Contractors

Please complete the following table with your company's lost-time injuries frequency rate (e.g. lost-time injuriesper 1 mio hours worked) for employees and contractors. Please also indicate a benchmark figure for yourindustry / peer group and specify the unit.✓ LTIFR Unit 2006 2007 2008 2009 Please

explain trend



Employees 1,000,000hours - Nestlémeasureswork relatedinjury/illnessrate per 1million hoursof exposure.This methodappliesto bothemployeesandcontractors.nestlé hasapproximately278,000empoyeesworldwide.

0.52 incidentsper 100.000hours worked




Nestlé investsenormousenergy toincrease theawarenessof safety inthe company.Managers,teamleaders andemployees(manycontractorstoo!) are beingtrained andorganisationsare constantlybeingupgraded soas to reduceour accidentrate by atleast 20%every year.In the period2005-2009,we haveeliminated80% of theinjuries in theworkplace.Pleasesee "http://www2.nestle.com/CSV/OurPeople/HealthSafety/Pages/HealthSafety"for details.Unfalteringleadershipcommitment,initiated bythe CEO (P.Brabeck until2008 andP. Bulckesince then)and followedthrough bythe ExecuitveBoard and allthe commandchain, isthe maincomponentof our safetystrategy. Itincludes fullemployeeinvolvement(throughmandatorybehaviourbasedprogramsin ourfactories anddistributioncentres) andmodern tools(intranetsoftware tomonitor safetyindicators,practicallyin real time,worldwide).Nestlé is inthe process ofcertifying allits factoriesagainstOHSAS18001 (85%to date).



Contractors 1,000,000hours - Nestlémeasureswork relatedinjury/illnessrate per 1million hoursof exposure.This methodappliesto bothemployeesandcontractors.Nestléestimates thenumber ofcontractors toapproximately63,000full timeequivalents.Contractorsgenerally workwith Nestléonly for shortperiods andtherefore theestimation ismade basedon the numberof work hoursdeclaredby thecontractorsto theadministrationof therespectivesites wherethey worked.





The safetystrategymentionedaboveincludesany personworking forNestlé inour sites.Contractorsafety is asimportant asemployeesafety.Contractsspecify thatcontractorworkers mustadhere to theNestlé Safetyprinciplesand complywith theNestlé SafetyManagementSystemrequirements.Contractorsreceive safetyinductionbefore theystart the work,and theirmanagers arethoroughlybriefed aboutNestlé'sobjective ofnot havingany accidentsin our sites.In as muchas possible,contractorsare trainedon safetymatters,especiallywhen theirwork requiresinteractionwith Nestléprocessesand systems.Any personentering aNestlé site forwork reasons,and who is notan employee,is considereda contractor.Temporaryworkersmanageddirectlyby Nestlépersonnel areconsideredas regularemployees,not ascontractors,and thereforetheir accidentsare reportedas employeeaccidents.



BenchmarkEmployees

A largecompanyactive alsoin the Foodsector isUnilever.They declared163,00employees for2009. Unileverreports theirinjury/illnessfrequency rateper 1,000,000hours since2009.Previously,they used100,000hours.

0.18 0.12 0.10 _ _ _ _ _ Webelieve thebenchmarkedcompanyappliesroughly thesame strategyas us forsafety, exceptthey starteda systematiceffort 10 or 15yeas beforewe did. Weexpect to beat roughly thesame level asthe leadersof safety inour industryin a coupleof years, andwe invest asmuch effortas necessaryto attain thisobjective.



BenchmarkContractors

We have notbeen able tofind publisheddata oncontractoraccident ratefrom othercompaniesin our sectorand our sizerange.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Most largecompanieswe know donot keep trackof contractoraccidents.Manyconsider theirtemporaryemployees(temporaryworkers paidby an externalorganisationbut managedfunctionallyby thecompany) ascontractors,contrary toNestlé, whoconsidersthem asregularemployeesfor all mattersrelated tooccupationalsafety andhealth.


❍ Not known

Comment :We have not been able to find benchmarking data about contractors in other companies. Also, the benchmarknumbers indicated here are extracted from graphs published by the benchmarked company in the past (thebenchmarked company decided not to publish LTIFr data as of 2009, replacing it with Total Recordable InjuryFrequency rate). Nestlé publishes both LTIFr and TRIFr (Please see "http://www2.nestle.com/CSV/OurPeople/HealthSafety/Pages/HealthSafety.aspx").

3.6.2 Occupational Illness Frequency Rate (OIFR) Employees & Contractors

Please indicate your company's occupational illness frequency rate (OIFR) for employees for the year 2009. If youdo not use OIFR, please indicate whether you use an alternative management tool to measure OIFR.✓ in 2009

0.0138 incidents per 100.000 hours workedper million hours worked.



❍ Not known

❍ Not applicable

Comment :Nestlé measures occupational illness frequency rate as "non event related injuries", i.e. any injury that is not dueto an instantaneous event (accident). In 2009, less than 6% of all our Lost Time Injuries were due to non eventrelated (NER) causes. Our NER LT Injury frequency rate is 0.138 per million hours of exposure, or 0.0138 per100,000 hours. ERROR on this page: The legend below the box for data (see above) says "per thousand workinghours", but it should say "per hundred thousand working hours".

3.6.3 Fatalities (total no) Employees & Contractors

Please complete the following table with the number of fatalities for employees and contractors.✓ Fatalities Unit 2006 2007 2008 2009 Please

explain trend



Employees(work-relatedfatalities)

Nestléemploysapprox.278,00 peoplearoundthe world,which meansapprox. 550million hoursof exposure.

3 11 11 3 The absolutenumber offatalities onsite doesnot followthe trend wesee in thereduction ofall accidents.Despite allour effortsto preventaccidentsin 2007 and2008, wedeplored 11employeefatalities. In2009, we hadonly 3. But weare not clearabout whetherthere is atrend. Whennormalisedvs. the hoursof exposure,the figuresbecomeminute (0.005per millionhours in 2009,0.02 in 2008).In theseconditions,we believethe signal/noise ratiois too weakto show truetrends. Also,for severalyears now, weregister moreemployeefatalities onthe road thanon our sites.In 2008 westarted acompany-wide effortto increaseour drivingsafety (NestléSafe DrivingProgram);unfortunately,the companyhas little orno controlon the safetyconditionsoutside oursites and ourefforts arenot alwaysrewarded.Nevertheless,Nestléconsiderswork relatedfatalities asvery seriousblows to ourcompany andeverything isbeing done toprevent them.



Employees(non work-relatedfatalities)

550 millionhoursexposure

2 4 6 5 We believethere is notrend tobe definedhere. Thesefatalitiesare almostall due tocardiovascularproblems orother non-infectiouspersonalhealthconditions.Nestlé hasprogramsto informand educateemployeesabout nutritionand lifestylefactorsthat mayinfluence lifeexpectancy.Pleasesee http://www2.nestle.com/CSV/Nutrition/Pages/Nutrition.aspx.However,cardiovascularand othermedicalconditionsmay havebeen acquiredbefore thevictimsentered intothe Nestlésphere ofinfluence.Therefore, itis impossibleto correlatethis type offatalities withour preventiveand educativeactions. Incountrieswhere HIVis endemic(e.g. SouthAfrica), Nestléhas programsto help ouremployeesdeal andcope withthe infection.Pleasesee http://www.nestle.com/CSV/CSVinAction/AllCaseStudies/ResponsetoHIV.htmfor moredetails,Possiblefatalities dueto infectiousillnessesthat occur offsite are nottracked byour safety KPIsystem at thismoment.



Contractors(work-relatedfatalities)

In 2009, weregisteredapproximately150 millionhours ofcontractorwork (allcontractorsincluded:construction,repair,maintenance,support toproduction,etc.).

5 4 3 1 Nestlé isincreasing itsinfluence andcontrol overwork done bycontractors onour sites. Andthe numberof fatalitiesseems tobe droppingconsistently.However,we are notsure that thisseeminglyclear trendis true, sincewe do notsee a similarcorrelation forour employeefatalities. Weneverthelessput all ourenergy toprevent anydeaths ofemployees orcontractorsindifferently.



Contractors(non work-relatedfatalities)

150 millionhours ofexposure

2 4 3 6 Contractorfatalities nonrelated towork are areflection ofthe healthconditions inthe countrieswhere theywork. Pleaserefer to thecommentsaboutemployee nonwork relatedfatalities. Tolearn moreabout Nestlé'sefforts toeducateemployeesand publicin generalabout healthynutrition(whichcan helpincreasingthe lifeexpectancyand thereforereduce nonwork relatedfatalities),To knowmore aboutour effortsto improvenutritionawarenesas a way ofimproving lifein generaland also lifeexpectancy(reductionof non workrelatedfatalities)pleasesee http://www2.nestle.com/CSV/Nutrition/Pages/Nutrition.aspx.




❍ Not known

Comment :The figures given above are absolute numbers. A proper comparison with other companies (benchmark) shouldbe normalised, so as to take into account the size of the exposure and not simply the absolute numbers. Mostnon work related fatalities are due to cardiovascular problems. We gather information about fatalities (whetehr ornot related to work) occurring on site for employees and contractors. We also have information about fatalities ofemployees at work off-site. But we are unable to gather off-site information for contractors.

3.6.4 MSA OHS


3.7 Standards for Suppliers

3.7.1 Standards for suppliers

For which of the following areas has your company established standards for suppliers across all countries ofoperation? Please provide supporting documents.

✓ Environmental standards/requirements

✓ Environmental management systems for the suppliers' operations

✓ Environmental standards for products and services delivered by suppliers

✓ Other environmental standards, please specify:Environmental Standards for farmer's operations (considered as suppliers)

❏ Environmental standards of suppliers under development. Roll out planned within ( months):_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Labor standards/requirements✓ Non-Discrimination (based on race, sex, etc.)



✓ OHS (Occupational Health & Safety)

✓ Layoff practices

✓ Forced or slave labor

✓ Child labor

✓ Freedom of association

✓ Wages

✓ Working hours and overtime

✓ Disciplinary practice

✓ Guidance regarding sub-contracting

✓ Other labor standards, please specify:Labor standards for Collection and Buying Stations (middle men in upstream supply chain)

❏ Labor standards of suppliers under development. Roll out planned within (months)::_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

❍ No standards


❍ Not known.

Comment :Nestlé has two main sources of supply (Introduction): 1. Directly from 540'000 farmers (in the case of milk, coffee,fruits, vegetables and specific supply chains e.g. cereals) 2. Indirectly through 20'000 currently in use suppliers(local manufacturers of semi processed materials raw, packaging and services and indirect materials), while 8’025regrouped suppliers (same company names) represent 90% of our total spend. This chapter goes into details of2. However the same principles apply to 1. and is described into 2.7 Raw Material Sourcing. A- SUPPORT OFINNOVATIVE AND ECO FRIENDLY OPERATIONS (Question Environmental Standards/requirements) Deliveryof all materials/goods to Nestlé has to be carried out by energy-efficient, economic, and pollution-controlledmeans of transportation. Suppliers are evaluated based on environmentally sound business practices detailed into"Env. Policy Quick reference Guide 2010". Suppliers are audited accordingly by approved and certified externalthird party auditors. B- PRE REQUISITE: As a pre requisite all materials bought from suppliers must meet localand international regulatory compliance requirements as well as Nestlé food safety and quality specifications,including limits on possible environmental contaminants. This, as described on C and D- is audited accordingly.C- OPERATIONS OF OUR SUPPLIERS Nestlé does audit manufacturing sites of our selected suppliers andrequires that supplier’s production sites: – RATIONALIZE the use of natural resources in order to minimize theNEGATIVE IMPACT on the environment (noise, air pollution, odors, energy, unnecessary transportation); –MAXIMIZE the production cycles in order to MINIMIZE the amount of WASTE produced and disposed of (gases,solids, liquids, waste water, etc.); – PREVENT any cross contamination or adulteration entering manufacturingprocess (e.g. heavy metals in pigments & printing inks, etc.) to ENSURE critical control points are safe. Thisis described into the "GMP Quick reference Guide 2010" attached and is audited on a risk assessment basis(from 1 to 5 years) by internal Nestlé audit group in by external third party companies (50/50), checking reality ofoperations at supplier site level. D- SELECTION OF SUPPLIERS (Question Labor Standards / Requirements) AtNestlé, there is a clear procedure to select new suppliers. This procedure is called the Vendor Approval Process(document "Vendor Approval Process Quick Reference Guide 20100429.docx") and is following 3 major phases:1- Pre qualification of suppliers (following a risk assessment evaluating suppliers regarding their financial stability,technical & ensuring supply ability, food safety & quality standards, responsible sourcing = ethical practices);2- Audit of the suppliers pre-selected out of phase 1. This regarding Food safety, quality as well as responsiblesourcing = ethical practices. For critical materials technical & ensuring supply (including eco friendly practices)ability is audited as well. This is audited through external audit companies to preserve objectivity. 3- Approval ofvendors (internal Nestlé) where we give global visibility of supplier being officially approved out of phase 2. to



all Nestlé markets around the world (to unlock supplier's chance to supply other countries). E- RESPONSIBLESOURCING = AUDIT OF SUPPLIER ETHICAL PRACTICES The Nestlé Supplier Code defines the minimumrequirements we ask our suppliers to respect in making business with us ("NSC Quick reference Guide 2010"attached). The Nestlé Supplier Code is communicated systematically to suppliers through our business contractand is compulsory requirement to respect. Nestlé made it SIGNED and ACKNOWLEDGED by ALL SUPPLIERS,regardless of material, service or location in order to organize the second step of the Vendor Approval Process(see D- above) which is the external third party audit of supplier's ethical practices called Responsible Sourcing.

3.7.2 Implementation of standards for suppliers

Please indicate which of the following elements your company has established to assure effective implementationof its standards for suppliers.✓ ✓ First audits conducted at 100

% of sites of new suppliers in 2009.

✓ Internal re-audits/spot-checks conducted at 50% of supplier sites during 2009.

✓ Independent external audits/spot-checks conducted at 25% of sites during 2009.

✓ Require certification of suppliers to international standards (such as SA8000, ISO14001 or similar), pleasespecify these standards and the level of implementation across your suppliers' base: A- Suppliers haveto comply with the Nestlé Supplier Code which is based on international standards and conventions. B-Certified management systems according to ISO 14001, OHSAS and SA 8000 are recognized as evidenceof compliance with the corresponding requirements of the Supplier Code. This is an incentive for suppliersto obtain such certification and to avoid Responsible sourcing audits.

✓ Corporate-wide information system for audit results, degree of compliance, action plans, schedules, pleasespecify: A- Nestlé promotes the use of Sedex (www.sedex.org.uk) to suppliers in order to store supplierethical performance, Responsible Sourcing audit results, monitor degree of progresses on action plans.B- Sedex allows suppliers to share audit reports and self-assessments with customers of their choice andthereby avoids duplication of assessments and audit fatigue. Sedex is also a third party company whichguarantees the confidentiality of the information to suppliers, see SEDEX website attached.

✓ Provide opportunity for third parties to report non-compliance.

✓ Activities to integrate sub-contractors into the compliance system, please specify:Contract-manufacturers and sub contractors are considered as suppliers and should either make proofof certifications valid for parts of the Responsible Sourcing audit or either organize a full ResponsibleSourcing audit in an agreed time frame (max 6 months) with Nestlé. So far all co-manufacturers have beencovered since they use Nestlé brand, image and recipes.

✓ Other activities to assure effective implementation of your standards in your suppliers operations. Pleasespecify: Nestlé is a member of the AIM-PROGRESS Task Force, an initiative of the leading FMCGcompanies that support the use of common evaluation methods to determine supplier performance andhelp to promote responsible sourcing practices within the supply chain. Through this task force we arerunning Supplier Days in fast growing markets to increase awareness of our suppliers but also suppliersthat are not yet our partners. This is indeed leveraging our program to the industry level.

❍ No formal assurance system for the implementation of standards for suppliers in place.




❍ Not known

Comment :Regarding percentages given above: - According to the Vendor Approval Process described in 3.7.1 all newsuppliers have to go through food safety/quality AND Responsible Sourcing audits, no exception (see "VAPQuick Reference Guide 2010" attached). - Nestlé has an internal target of re auditing 50% of its supplier baseevery 2 years (for Food Safety and Quality) and every 3 years for Responsible Sourcing. - This is done usingexternal third party approved and recognized auditors (SGS, BVQI, ITS for Responsible Sourcing, larger groupfor Food Safety and Quality). Taking into consideration chapter 3.7.1 Nestlé check the on site implementationof standards by suppliers regarding: A- SAFETY and QUALITY (Performance indicators and achievements) Asdescribed Nestlé requests Food Safety and Quality audits of its suppliers based on the material risks. In most ofthe case, these audits are performed by Nestlé Quality Teams to ensure that suppliers comply with our internalhigh level specifications. In 2009 Nestlé has achieved the target of 3'200 audits of supplier sites to ensure thatfood safety and quality as well as regulatory compliance mandatory practices are respected. In 2 years timewe cover 50% of our entire supplier base to be audited. B- RESPONSIBLE SOURCING = ETHICAL AUDITS(Performance indicators and achievements) In line with the full acknowledgement of the Nestlé Supplier Codeby our entire supplier base, we are actually aggressively running the audit phase as well. In the past our globaldatabase contained 165’000 vendors, however we finished the exercise to clean our database of obsolete andunused vendors and we came with a clean database of 20’000 vendors. However 90% of our total spends iscovered only by 8’025 vendors. • Raw Materials -> 1’054 vendors = 90% of spend • Packaging Materials ->377 vendors = 90% of the spend • Services and Indirect Materials -> 6’594 vendors =90% of the spend TheResponsible Sourcing objective is to carry 1'800 audits for 2010-2011, always covering 90% of our total supplier’sspend and cover accordingly 25% of our total supplier base. Current status is 10% in April 2010 while increasingdaily (please refer to "Responsible Sourcing Quick reference Guide 2010" attached). Indeed the process to verifycompliance of our suppliers with the minimum requirements of the Nestlé Supplier Code is called “ResponsibleSourcing”. This is done by external third party audit companies to ensure objectivity of the audit results.

3.7.3 Managing non-compliance

Please indicate which of the following options your company has implemented to deal with non-compliance of itsstandards for suppliers. Please provide supporting documents.

✓ ✓ Policies and procedures for management of non-compliance in place

✓ Defined categories of non-compliance and defined categories of remediation actions

✓ Joint company-supplier corrective action plan coupled to reaudits

✓ Organisational learning built into non-compliance management (e.g. change in reporting lines)

✓ Effects of remediation on worker's/community's social fabric taken into account

❍ No guidelines existing


❍ Not known

Comment :Background (as per 3.7.1. and 3.7.2) - Acknowledgement of the Supplier Code is a condition to supply, -Compliance with the Nestlé Supplier Code is a standard criterion for the approval of suppliers, - This complianceis checked through external third party Responsible Sourcing audit. A- DEFINITION OF NON COMPLIANCES



(questions “Policies and procedures”, “defined categories”) There is a clear Nestlé definition of minor, major,critical non compliances (see document attached "Responsible Sourcing Program Reference PPT 2010" slide8). At the discovery of non-compliance, Nestlé demands that appropriate corrective measures are taken in anagreed time frame. Nestlé doesn't draft the actions and the time frame required alone, it is done with the externalthird party auditors with the full involvement of suppliers. If critical non compliances are found, external thirdparty audit companies have the duty to alert Nestlé within 24 Hours following the audit visit. If major or criticalnon compliances are found Nestlé reserves the right to stop the commercial relationship with the supplierswithout buffer timing as stated in the business contract. B- FOLLOW UP OF NON COMPLIANCES (questions“joint company-supplier” and “organizational learning”, “Effects of remediation”) There is a joint effort made byNestlé together with suppliers to improve non best in class practices highlighted during ethical audits. Nestlé andexternal auditors gives as benchmark best practices seen in other supplier’s sites and suppliers learn accordinglyfrom their peers. Evidence of effective implementation of corrective actions is mandatory - either through afollow-up audit or desktop evidence if appropriate. Nestlé strategic buyers have the personal objectives to followup actions plan agreed with suppliers during the Vendor Performance Monitoring embedded into the VendorApproval Process steps. Nestlé reserves the right to terminate supply agreements in case of major or critical non-compliances or if follow up actions are not taken. There is a monthly procurement call per zone to review majornon complaint’s supplier’ situation in order to take necessary actions and decisions.

3.7.4 Coverage

Please indicate the share of procurement costs for goods sourced according to these standards as a percentageof total procurement costs in the year 2009.✓ 98

% of total costs of goods


❍ Not known

Comment :A- Acknowledgement of the Nestlé Supplier Code is a pre requisite for suppliers to make business with Nestlé.We made it compulsory since 2008. B- Few suppliers didn't acknowledge it yet but this is only related to veryfew exceptions where we are currently closing gaps (i.e. suppliers of raw cocoa located in Ivory Coast whichdon’t have full transparency on upstream supply chain of cocoa beans). In few exceptional cases we had mutualrecognition process of codes of conduct with for example big commodity supplying companies. C- Audit phaseof our suppliers is running as described in 3.7.1; 3.7.2; 3.7.3; and is expanding day to day to cover the entiresupplier base in the midterm.

3.7.5 MSA Standards for Suppliers

In this section we include a performance score on the Corporate Sustainability Monitoring with the objectiveto verify the company's involvement and management of crisis situations that can have a damaging effect onreputation. The evaluation will be filled in by the responsible analyst of your industry. No additional information isrequired from your company. Please disregard the comment box. No comment as requested

Comment :



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